Renewable energy systems (RES) require more efficient, reliable and cost effective energy storage systems to benefit more from these kind of environmentally friendly energy sources and reduce CO2 emissions. Compressed air energy storage (CAES) is one of the mechanical energy storage technologies that uses pressurized air to store and generate power when needed. Small scale CAES systems has been developed for RES application due to its advantages like easy installation, low maintaining costs, modular structure and running up time. In this study, a new small scale CAES system, which is running with liquid pistons to obtain isothermal compression and expansion, and a pressure regulator to compensate pressures between liquid pistons and air, is suggested. A detailed description of the novel CAES system design is given and effect of the components' specifications of the system are explained. Experimental results showed that, designed CAES system is a promising technology for RES, standalone and mobile applications. Specific components compatible with operating conditions of the system need to be designed in order to improve effectiveness and reliability.