Mortenson's bottom line lifted by wind and solar energy projects

Mortenson is perhaps best known for sports complexes. Twin Cities venues from Xcel Energy Center to U.S. Bank Stadium were built by the big Golden Valley-based construction company. Less flashy, but keenly important to Mortenson's bottom line, is its renewable energy business, particularly wind and solar power projects. • Mortenson began in 1995 by building a wind "farm" consisting of a single turbine and is now a national leader in the building of renewable energy projects.

In 2016, renewable energy projects accounted for 34 percent of Mortenson's nearly $4 billion in annual revenue.

"It was up and down in the first years, but we stuck with it," said Tom Wacker, Mortenson's chief operating officer.

The company is in the midst of a renewable energy boom as developers and utilities take advantage of wind and solar tax credits, which eventually phase out. Beyond that, the future is a little murky, as the renewable energy business has typically swung with the availability of tax credits.

But the cost of renewable energy is dropping, and the economics of wind power have become particularly favorable. Plus, many state governments are pursuing policies friendly to renewable energy, despite President Donald Trump's order last week to abandon the federal Clean Power Plan, an effort to cut carbon emissions.

"There's still plenty of opportunity," Wacker said. "This will be a business for years to come."

Minneapolis-based Xcel is a longtime customer of Mortenson, which has built several of the utility's wind farms, including in Minnesota.

Just last month, Mortenson was selected to build Xcel Energy's Rush Creek wind farm in Colorado, the largest single-phase wind project in North America.

The Rush Creek site — 90,000 acres to be dotted with 300 turbines — will be capable of churning out 600 megawatts of power when the wind is blowing. To put that in perspective, Xcel's nuclear power plant in Monticello has a 617-megawatt capacity.

Mortenson was founded in 1954 by M.A. Mortenson, whose son M.A. "Mort" Mortenson led the company for many years until 2015. Today, Mort's son, David, is the company's chairman.

The Mortenson company does engineering, procurement and construction work for a roster of projects, including data centers, hotels and arenas across the country.

The company's first renewable energy project 22 years ago — a single turbine in Adair, Iowa — came at the request of a wind turbine manufacturer. The wind industry was in its infancy in the 1990s, but Mortenson executives sensed it had potential.

By the early 2000s, "there was still somewhat of a debate on whether this was a long-term business," said Wacker, a University of Minnesota mechanical engineering graduate who started with Mortenson in 1986.

But by the latter 2000s, the renewables business had taken off, and Mortenson began branching out beyond wind. In 2008, it entered the solar business, with its largest project so far in that category a 600-megawatt installation in California completed two years ago.

Mortenson initially focused on building the concrete foundations for renewable projects, and then constructing wind turbines and solar arrays. In 2010, it began doing civil engineering for renewable projects — such as building roads to wind turbines. It had previously contracted out that type of job.

A year later, the company started a high-voltage transmission business, connecting renewable energy projects to the electrical grid. Then in 2015, Mortenson launched a business to install large battery storage systems, which often work in tandem with renewable power facilities.

Mortenson's renewable energy group has grown tenfold since the early 2000s under Wacker's leadership. In 2015, it was by far the largest U.S. wind energy contractor and the country's third largest solar contractor, according to the most recent annual rankings by Engineering News-Record (ENR).

Avon, Minn.-based Blattner Energy — another renewable energy construction giant — apparently doesn't report numbers to ENR. Otherwise, it too would rank high in both wind and solar.

"In wind, there are a couple of companies — Mortenson and Blattner — that have held onto the lion's share of the market for a decade," said Bruce Hamilton, director of energy for Navigant Consulting.

Hamilton expects the wind business to boom in the next few years, a result of Congress' 2015 extension of wind energy production tax credits. Projects started in 2016 get 100 percent of the tax credit, which is scaled down annually through 2019. Wind power installation could get "pretty bad" in the early 2020s, Hamilton said, assuming it follows previous trends after tax credits have expired.

Solar power investment tax credits won't be phased out until 2022, and even then a smaller credit will remain for commercial and utility projects.

Both wind and solar energy costs are "dropping like a rock," Hamilton said. That's a critical factor for renewable energy's future if tax credits completely disappear.

Unsubsidized wind energy in some areas is increasingly as cost-effective as coal and natural gas power generation.

"Even absent the tax credits, wind generation remains cost competitive, a testament to the improvements in wind technology that have driven down costs and increased turbine efficiency," according to a recent report by Morningstar analysts.

Other forces favor wind and solar, too. Corporate use of renewable energy — for instance, rows of solar panels atop large commercial buildings — shows no sign of slowing, according to the Morningstar report.

And the number of states adopting renewable energy standards, including mandates for a certain amount of wind or solar power, is growing, according to Morningstar.

Minnesota was an early adopter of such a standard in 2007, calling for utilities to get 25 percent of their power from renewables by 2025.

"State renewable energy portfolio standards will keep U.S. renewable energy growth in line with that achieved during the Obama presidency," according to the Morningstar report.

Based solely on existing state mandates, renewable energy — including hydro power — will grow to meet 20 percent of U.S. electricity use within eight years, up from 15 percent now, the report said.

That sort of forecast aligns with Mortenson's thinking on the solar and wind power markets.

"States are saying, 'We want renewable energy independent of what the federal government is doing,' " said Mortenson's Wacker.

Mike Hughlett • 612-673-7003