Are subsidies market manipulation? The politics of electricity market hybridization in the United States

Electricity markets have increasingly adopted hybrid forms, with every existing liberalized market featuring some combination of competitive short-term markets with state sponsored mechanisms to promote renewables, ensure resource adequacy, and protect participants from price volatility. This paper examines electricity market hybridization as a political process. It asks how the form taken by market hybridization is shaped by the struggle among actors in the field of electricity generation. Based on records of regulatory proceedings, internal documents of the PJM Independent System Operator, and interviews, it traces a 15 -year running controversy over state -supported generation in the largest regional electricity market in the U.S. Using a field -analytic perspective, the paper shows how owners of generation situated in different positions in the field, struggled over the formation of a hybrid market, in particular the way competitive mechanisms are reconciled with state support for investment. Focused on a market device known as the Minimum Offer Pricing Rule, the struggle concerned whether state subsidies could be converted to effective market advantages, or whether they should be treated as market manipulation, and their effects neutralized. At each stage of this process, state intervention introduced actors with new properties and new competitive advantages, initiating a political conflict over the market rules. The resulting configuration of state -directed investment planning with competitive short-term markets is a political accommodation among actors in the field.