An accurate dynamic simulation model for compressed air energy storage (CAES) inside caverns has been developed. Huntorf gas turbine plant is taken as the case study to validate the model. Accurate dynamic modeling of CAES involves formulating both the mass and energy balance inside the storage. In the ground reservoir based storage bed, the heat transfer from the ground reservoir plays an important role in predicting the cavern storage behavior and is therefore taken into account. The heat transfer coefficient between the cavern walls and the air inside the cavern is accurately modeled based on the real tests data obtained from the Huntorf plant trial tests. Finally the model is validated based on a typical daily schedule operation of the Huntorf plant. A comparison is also made with the results obtained from adiabatic and isothermal assumptions inside the cavern to gain further insights. Such accurate modeling of cavern dynamics will affect the design of the cavern storage beds for future explorations.