Most people know about the huge capital investment that went into the Alberta Oil Sands. It’s said to be around 100 billion dollars. This includes all the equipment, refining, and worker cost.
The current daily production from the oil sands is about 1 million barrels of oil per day. Using an assumed cost per barrel of $100, this gives a gross revenue of 100 million dollars, per day.
Now, what if you were instead to spend 100 billion dollars on massive wind farm construction. What would be your return then?
Let’s first calculate how much wind turbine capacity you can install for 100 billion dollars.
Wind power costs approximately $2 per Watt of installed capacity. So for a 1 MW installation it would cost 2 million dollars (ref: http://www.amo.on.ca).
So 100 billion dollars will give you 50 billion Watts of installed wind capacity. This is 50 GW.
Assuming a 30% capacity factor (meaning the wind turbines produce 30% of their maximum rated power due to intermittent wind), we have an actual average wind power output of 50×0.3 = 15 GW.
How much revenue does 15 GW produce a day assuming a utility rate of 15 cents/kWh?
15 GW = 15 x 106 kW
Therefore, revenue from wind power = 15×106 kW x 24 hours/day x 15 cents/kWh = 54 million dollars, per day
Now, the production costs of the oil sands are high. The break-even cost is something like $30-50 per barrel. So profit is strongly dependent on oil prices, which have been pretty volatile.
For wind power, the production cost is much lower once it’s installed and running. As an estimate (which includes production tax credits), it can be 5 cents/kWh (ref: http://www.awea.org/faq/wwt_costs.html).
This means that the installed wind power will generate 36 million dollars of profit per day. Whereas the oil sands may generate 50 million dollars of profit per day, assuming $100 per barrel. But these days the cost per barrel is quite a bit less due to the recent sharp drop in oil prices.
By the way, I’m not factoring in the environmental cost of oil sands production, which includes land reclamation. But it’s huge.
But it seems pretty obvious to me, even if I was just a business man, wind power is the better option, and more stable over the long-term.