A compressed air energy storage system may have an accumulator and a thermal storage subsystem having a cold storage chamber for containing a supply of granular heat transfer, a hot storage chamber and at least a first mixing chamber in the gas flow path and having an interior in which the compressed gas contacts the granular heat transfer particles at a mixing pressure that is greater than the cold storage pressure and the hot storage pressure and a conveying system operable to selectably move the granular heat transfer particles from the cold storage chamber, through the first mixing chamber and into the hot storage chamber, and vice versa.