The Long-Term ROI of On-Site Gas Generation Systems
For facilities that regularly consume nitrogen or oxygen gas, the price paid for the gas itself is only one component of the total cost.
Deliveries, cylinder handling, tank rentals, storage, administrative requirements and potential supply disruptions can all add to the true cost of maintaining a dependable gas supply.
That’s why businesses evaluating on-site nitrogen or oxygen generation systems should look beyond the initial equipment investment and consider the system’s potential return over its entire operating life.
From Recurring Gas Purchases to On-Site Production
Traditional gas supply arrangements typically require businesses to continually purchase nitrogen or oxygen from an outside supplier.
Depending on the application and volume, gas may arrive in cylinders or other delivered formats. Regardless of the delivery method, the business remains dependent on an outside supply chain.
On-site generation changes the economics.
Instead of continually purchasing the gas itself, a business invests in equipment that produces nitrogen or oxygen from the surrounding air. Once installed, the system can generate gas whenever it is required.
The question therefore isn’t simply:
“How much does an on-site gas generator cost?”
A more useful question is:
“How much could our current gas supply method cost us over the next five, ten or even twenty years?”
Where Does the ROI Come From?
Several areas can contribute to the financial return of an on-site gas generation system.
Reduced Gas Purchasing Costs
The most direct opportunity for savings is reducing or eliminating recurring purchases of delivered nitrogen or oxygen.
Facilities with substantial and consistent gas consumption can potentially realize significant savings over the life of a properly sized system.
Instead of paying a supplier for each additional unit of gas consumed, the facility generates the gas itself.
Fewer Delivery-Related Expenses
Delivered gas can carry expenses beyond the gas itself.
Depending on the supply agreement, costs can be associated with:
- Delivery
- Transportation
- Cylinder or tank rental
- Fuel or environmental surcharges
- Handling
- Storage
Generating gas at the point of use can eliminate or substantially reduce many of these recurring expenses.
Reduced Cylinder Handling
Cylinder-based gas supplies also require employees to receive, move, store and replace cylinders.
That consumes labor that could otherwise be spent on production and other valuable activities.
An on-site generation system can automate much of the gas supply process, reducing the need for employees to continually manage cylinders.
More Predictable Operating Costs
Outside gas pricing can change over time due to transportation costs, supplier pricing and other market factors.
On-site generation moves more of the expense under the facility’s control. After the equipment investment, operating expenses primarily revolve around items such as electricity, compressed air and routine maintenance.
That can make long-term gas costs more predictable.
Reliability Has Financial Value, Too
ROI isn’t limited to the amount shown on a gas invoice.
What happens if your facility runs low on nitrogen or oxygen and the next delivery isn’t available?
For businesses where gas is critical to production, an interruption can slow or stop operations.
The financial impact of downtime can quickly outweigh relatively small differences in gas pricing.
An appropriately designed on-site generation system provides a continuous source of gas at the facility, helping businesses reduce their reliance on external delivery schedules.
That additional supply security can be an important part of the system’s overall value.
Produce the Purity You Actually Need
One often-overlooked factor in nitrogen generation ROI is purity.
Higher nitrogen purity generally requires more energy to produce. Not every application needs ultra-high-purity nitrogen.
For example, an application that performs properly at 98% nitrogen doesn’t necessarily benefit from producing 99.999% nitrogen.
This is why properly sizing and specifying the system is so important.
On Site Gas Systems offers both PSA and membrane nitrogen generation technologies, allowing systems to be matched to an application’s actual purity, flow and pressure requirements.
Producing the appropriate purity rather than simply maximizing purity can help improve system efficiency and operating economics.
Calculating the Payback Period
Every facility is different, which means there isn’t one universal ROI calculation for an on-site gas generator.
A basic evaluation should compare the total current cost of delivered gas against the projected cost of owning and operating an on-site system.
Factors to evaluate include:
- Annual nitrogen or oxygen consumption
- Current gas price
- Delivery and rental charges
- Required purity
- Required flow rate
- Required pressure
- Hours of operation
- Electricity costs
- Compressed air requirements
- Maintenance expenses
- Initial equipment and installation costs
From there, a business can estimate annual savings and determine an approximate payback period.
For example, if a facility spends $100,000 annually on its current gas supply and an on-site system reduces the total annual gas-related expense to $35,000, the potential operational savings would be approximately $65,000 per year.
The actual economics will vary substantially by facility, but the principle is straightforward: the more consistently a business consumes gas, the more valuable producing that gas on-site can become.
Think Beyond the Initial Payback
Reaching the payback point isn’t the end of the ROI story.
Once cumulative savings have offset the initial investment, continued operation can generate additional savings year after year.
Equipment lifespan therefore matters.
A well-designed gas generation system that continues operating reliably for many years can deliver considerably more value than the initial payback calculation alone suggests.
That makes system quality, proper sizing and ongoing maintenance important considerations when evaluating competing solutions.
Nitrogen and Oxygen Generation as a Long-Term Investment
For many facilities, nitrogen and oxygen aren’t occasional purchases. They’re essential production inputs.
When gas consumption is significant and ongoing, continually purchasing delivered gas means continually paying an outside supplier.
On-site generation provides an opportunity to transform that recurring expense into an investment in the facility’s own infrastructure.
The potential benefits extend beyond direct savings to include:
- Greater supply independence
- More predictable operating expenses
- Reduced delivery requirements
- Less cylinder handling
- On-demand availability
- Gas production matched to actual requirements
Determine the Potential ROI for Your Facility
The best way to understand the economics of on-site generation is to evaluate your facility’s actual gas consumption and operating requirements.
On Site Gas Systems designs and manufactures nitrogen and oxygen generation systems for industrial, commercial, medical and specialized applications. Systems can be engineered around your required purity, pressure and flow rate to help maximize efficiency and long-term value.
Contact On Site Gas Systems to discuss your current nitrogen or oxygen usage and determine whether on-site generation makes financial sense for your operation.
