STEEL FOR FUEL: OPPORTUNITIES FOR INVESTORS AND CUSTOMERS

The policy brief examines the "steel for fuel" strategy, where utilities replace fossil fuel plants—which incur pass-through fuel costs with no earnings potential—with wind and solar assets that allow for regulated equity returns. Using Xcel Energy as a primary example, the document explains how this transition can reduce consumer bills through fuel savings while maintaining or increasing shareholder value. It highlights the role of competitive bidding and the balance between utility ownership and independent power producers (IPPs) to ensure the lowest costs for consumers.

• The "steel for fuel" strategy allows utilities to increase equity earnings by shifting capital from fossil fuel plants requiring expensive fuel inputs to renewable plants that use free fuel, such as wind and solar.
• Consumers can achieve substantial savings by substituting the operating costs of fossil fuels with the capital costs of new wind and solar plants, especially if unpaid investments in retired plants are refinanced via securitized or ratepayer-backed bonds.
• Xcel Energy has implemented this strategy by adding wind and solar projects to its portfolio while retiring coal plants; for example, its Rush Creek Wind Farm and related transmission investment of approximately $1.2 billion exceeds the undepreciated investments of its retired coal plants.
• Financial analysts, including those from Credit Suisse, view the "steel for fuel" approach as a "win-win" because it replaces non-earning pass-through fuel expenses with capital investments that generate regulated returns for utilities while stabilizing customer rates.
• To ensure the lowest costs, the document recommends a competitive bidding process that includes a mix of utility ownership and independent power producers (IPPs) to prevent the utility's monopsony power from harming public interests.

APA

Lehr, R., & O’Boyle, M. (2018). STEEL FOR FUEL: OPPORTUNITIES FOR INVESTORS AND CUSTOMERS. Energy Innovation. https://energyinnovation.org/wp-content/uploads/Steel-for-Fuel-Brief_12.3.18-2.pdf

Chicago

Lehr, Ron, and Mike O’Boyle. STEEL FOR FUEL: OPPORTUNITIES FOR INVESTORS AND CUSTOMERS. Energy Innovation, 2018. https://energyinnovation.org/wp-content/uploads/Steel-for-Fuel-Brief_12.3.18-2.pdf.

Wikipedia

{{cite report |last1=Lehr |first1=Ron |last2=O’Boyle |first2=Mike |title=STEEL FOR FUEL: OPPORTUNITIES FOR INVESTORS AND CUSTOMERS |publisher=Energy Innovation |date=December 2018 |url=https://energyinnovation.org/wp-content/uploads/Steel-for-Fuel-Brief_12.3.18-2.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lehr2018steel, author = {Lehr, Ron and O’Boyle, Mike}, title = {{STEEL FOR FUEL: OPPORTUNITIES FOR INVESTORS AND CUSTOMERS}}, institution = {Energy Innovation}, year = {2018}, month = dec, url = {https://energyinnovation.org/wp-content/uploads/Steel-for-Fuel-Brief_12.3.18-2.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }