A novel high efficiency reciprocating piston engine — the isoengine — is predicted to achieve net electrical efficiencies of up to 60% in units of 5 to 20 MWe size. The high efficiency and at the same time a high specific power output are achieved by integrating isothermal compression, recuperative preheating and isobaric combustion into a novel power cycle. The isoengine can utilize distillate oil, natural gas or suitable biofuels. While the first commercial isoengine is envisaged to have a power output of 7 MW, a 3 MW prototype engine is currently being tested. Since compression and combustion are performed in different cylinders, these processes can also be performed at different times such that the isoengine can be used to create a highly efficient small-scale compressed air energy storage (CAES) system. In such configuration, the engine can operate at more than 140% nominal load for a limited time, which depends on the air storage capacity.