This study addresses gaps in the integration of compressed air energy storage (CAES) with wind-diesel systems in remote areas, departing from previous research that mostly focused on diesel engine efficiency. Critical factors such as CAES sizing, design, and operation are thoroughly examined through a comprehensive analysis, including power supply–demand patterns and full-year system performance. Utilizing Kangirsuk, an Inuit village, as a case study, the research introduces a novel optimization-based sizing strategy for a small-scale adiabatic CAES (A-CAES) system integrated into a wind-diesel power plant. The study contributes by providing insights into power supply–demand patterns, proposing an optimization strategy for adaptive hybrid energy systems, and evaluating the performance of CAES systems over a year. Results show significant diesel fuel reductions, with a 55% reduction in diesel consumption for a single wind turbine with a CAES system, and an even greater reduction of 63.4% when employing two wind turbines with a CAES system. The diesel fuel savings are determined for oversized CAES systems, indicating that oversizing can improve the system’s diesel fuel independence up to 65.3%, albeit at a higher cost. The capital costs associated with achieving these reductions are $5,088,000 for the 55% reduction, $8,020,000 for the 63.4% reduction, and $11,520,000 for the 65.3% reduction. The cost-effectiveness analysis reveals that while oversizing contributes to enhanced fuel savings, the associated expenses need to be carefully considered in balancing diesel fuel independence gains against economic investment.