Wind farm developer reports uncertainty in industry 

Mortenson Construction has declared the wind energy industry “challenging and uncertain” after developing 100 wind farms in the United States and Canada.

The assessment by Mortenson, based in Golden Valley, is in its new 20-page report titled “Facing the Wind” (available at mortenson.com), which cites difficulty negotiating power purchase agreements, a lack of a federal renewable energy standard and undeveloped transmission lines as key issues. Thirty wind energy project owners or developers gave feedback for the report.

Minnesota is ranked No. 7 nationwide in wind energy capacity, with 1,818 megawatts of construction – or the equivalent of 1,212 General Electric 1.5-megawatt turbines.

As of Sept. 30, Minnesota listed 677 megawatts of wind farms under construction – far better than the zero listed by No. 2 wind energy state Iowa.

And there is plenty of real estate left to develop in the windy segments of Minnesota, which form an “L” spanning the state’s borders with Iowa, North Dakota and South Dakota.

Minnesota’s under-construction figure is far higher than in early 2010, when protesters delayed construction of Goodhue Wind, a 78-megawatt wind farm near Red Wing.

That development appears headed for a lengthy contested hearing process in 2011.

In the meantime, “I think challenging and uncertain are good words,” Peter Mastic, president and chief executive of Minneapolis-based National Wind, said of Mortenson’s characterization. National Wind is behind the Goodhue project.

The report describes problems including financing, assessing the long-term competitiveness of wind energy, finding locations and dealing with complaints from neighbors as inhibiting development of wind farms.

“I’m less worried about the long-term competitiveness of wind,” Mastic said. “The thing that many people forget is that once you commit to a wind project there is very little cost. If you look at the full life-cycle cost of wind farm versus the full life-cycle cost of a natural gas plant, wind is very competitive.”

The low price of natural gas, which led several Minnesota utilities to refurbish old coal-fired power plants to cleaner-burning natural gas, was cited by 70 percent of respondents as diminishing the growth of renewable energy. An additional 9 percent said natural gas will have a “significant impact” on the development of renewable energy.

One key inhibitor to building new projects mentioned in the Mortenson survey – the lack of a federal renewable energy standard, or RES – could give evidence to developers and banks financing renewable energy projects that the industry is viable.

In 2007, Minnesota lawmakers passed RES legislation that required electric utilities to generate 25 percent of their electricity from renewable resources by 2025. Xcel Energy, the state’s largest utility, must generate 30 percent of its power from renewable sources by 2020 under that law.

A Jan. 7 compliance report issued by the Minnesota Office of Energy Security said Xcel Energy has sufficient renewable generation or renewable energy credits to meet the 2010 requirement of 15 percent renewable energy.

Other state utilities will not need to file until the end of 2012, when they are required to generate 12 percent of their power from renewable energy sources.

According to the American Wind Energy Association, the amount of wind energy installed nationwide plunged 71 percent in the first nine months of 2010, compared with the same period in 2009.

Even so, conditions seem to be improving.

One key factor was the $18 billion, one-year extension of tax credits for renewable energy projects passed Dec. 17 by Congress. That vote gave industry executives until the end of 2011 to finish projects and receive a 30 percent investment tax credit.

“It’s been a very challenged industry, but there are some indications that things might get a little bit better,” said Jeff Wright, the former president of Minneapolis-based Midwest Wind Energy Finance.

Wright, principal and founder of GreenWright Partners, a Minneapolis renewable energy consultancy, expects that financing and development of energy projects should be by-products of increased demand for electricity since the recession.

Cameron Snyder, a spokesman for Mortenson Construction, said his company maintains a sense of optimism despite a lackluster 2010.

“Our business is growing,” said Snyder, noting that Mortenson plans to open a new office in Toronto on Jan. 19.

Unknowns at this time are the long-term impact of groups objecting to wind farms. Those groups have focused primarily on the effects of low-frequency noise, shadow flicker from spinning turbine blades and electric emissions related in underground wiring.