As the energy scarcity and environment problems become more and more severe, promoting renewable energy has become an important task and thus energy storage draws increasing attention for integrating renewable energy. Among many available options, advanced adiabatic compressed air energy storage (AA-CAES) are considered mature and affordable options for gridscale applications. However, the relatively high capital cost hinders the development of AA-CAES system. As a result, the cost-benefit analysis of AA-CAES application is studied in this paper. The thermodynamic characteristics of AA-CAES system are carefully studied and modeled. An optimal configuration method of AA-CAES capacity considering energy arbitrage is proposed and the optimal capacity of each component of AA-CAES is demonstrated. Simulation results indicate that the application of AA-CAES in arbitrage market is profitable but the payback period is long. The profit estimations are more realistic compare to conventional battery model. Profitable cost range of AA-CAES is found through sensibility analysis. Augmenting electricity price to improve economic of AA-CAES is discussed at the end.