The increasing use of renewable energy technologies for electricity generation, many of which have an unpredictably intermittent nature, will inevitably lead to a greater need for electricity storage. Although there are many existing and emerging storage technologies, most have limitations in terms of geographical constraints, high capital cost or low cycle life, and few are of sufficient scale (in terms of both power and storage capacity) for integration at the transmission and distribution levels. This paper is concerned with a relatively new concept which will be referred to here as Pumped Thermal Electricity Storage (PTES), and which may be able to make a significant contribution towards future storage needs. During charge, PTES makes use of a high temperature ratio heat pump to convert electrical energy into thermal energy which is stored as ‘sensible heat’ in two thermal reservoirs, one hot and one cold. When required, the thermal energy is then converted back to electricity by effectively running the heat pump backwards as a heat engine. The paper focuses on thermodynamic aspects of PTES, including energy and power density, and the various sources of irreversibility and their impact on round-trip efficiency. It is shown that, for given compression and expansion efficiencies, the cycle performance is controlled chiefly by the ratio between the highest and lowest temperatures in each reservoir rather than by the cycle pressure ratio. The sensitivity of round-trip efficiency to various loss parameters has been analysed and indicates particular susceptibility to compression and expansion irreversibility.