Renewable Energy Credits (RECs): What They Are and How They Work

Electricity from a wind farm and electricity from a gas plant are physically identical once they reach the grid. You cannot follow an electron from a turbine to your kettle. Renewable energy credits (RECs) solve that accounting problem: they turn each megawatt-hour of renewable generation into a numbered certificate that can be owned, sold and retired. This guide explains what a REC is, how one is created and tracked, what RECs cost, how solar RECs (SRECs) pay homeowners, and the honest answer to whether buying them is greenwashing. For the bigger picture of where the power itself comes from, start with our renewable energy overview.

What is a renewable energy credit?

A renewable energy credit is a certificate proving that one megawatt-hour (MWh) of electricity was generated from a renewable source and delivered to the grid. The EPA calls it “a market-based instrument that represents the property rights to the environmental, social, and other non-power attributes” of that renewable generation (EPA).

Three ideas make the definition work:

1. 1 REC = 1 MWh. A megawatt-hour is 1,000 kilowatt-hours (kWh). A typical US home uses roughly 10 MWh a year, so it would need about 10 RECs to cover its usage. Our kilowatt-hour guide explains the units.
2. The attributes are separable from the power. A wind farm sells two products: the electricity (a commodity, sold into the grid at the wholesale price) and the REC (the “renewableness”). They can be sold together or to different buyers.
3. Only one party can claim it. When a REC is retired in a tracking system, it can never be sold again. That is what prevents two buyers claiming the same renewable megawatt-hour.

“Renewable energy credit” and “renewable energy certificate” mean the same thing. The EPA prefers certificate; many state laws and utilities say credit. Both shorten to REC.

What information does a REC contain?

Every REC carries a unique serial number plus data that buyers and regulators use to judge its quality. According to the EPA, attributes include:

REC data field	Why it matters
Unique identification number	Prevents double counting
Renewable fuel type (wind, solar, hydro, biomass…)	Some buyers or programs only accept certain types
Facility location and interconnecting utility	Determines which grid, state program and region it counts in
Nameplate capacity	Project size
Project vintage (build date)	Shows whether the plant is new or decades old
Certificate (generation) vintage	The year the MWh was generated; programs limit how old a REC can be
Tracking system ID	Which registry issued it
State RPS eligibility	Whether it can meet a state compliance mandate
Emissions rate	Used in emissions accounting

Source: EPA, Renewable Energy Certificates.

How do renewable energy credits work?

A renewable generator’s metered output is registered in a regional tracking system, which issues one REC per MWh; the REC is then sold and finally retired by whoever makes the renewable claim. Step by step:

1. Generation is metered. A solar farm, wind farm or registered rooftop system produces electricity, measured by a revenue-grade meter.
2. The tracking system issues RECs. Regional registries such as ERCOT (Texas), PJM-GATS (Mid-Atlantic), M-RETS (Midwest), WREGIS (West), NEPOOL-GIS (New England) and NYGATS (New York) create one serialised certificate per MWh.
3. The REC is sold. The generator sells it to a utility, a broker, a company, or a green power supplier, either with the electricity (bundled) or separately (unbundled).
4. The buyer retires it. Retirement locks the REC to a named claim, for example “Company X, 2026 electricity use” or “Utility Y, 2026 renewable portfolio standard”.
5. The claim is made. The retiring party can now say it used that much renewable electricity. Anyone else, including the generator, must not.

Because the physical grid is shared, the EPA states that RECs are the instrument electricity consumers must use to substantiate renewable electricity claims (EPA). A company with solar panels on its roof that sells the RECs cannot honestly say it runs on solar.

Bundled vs unbundled RECs

	Bundled REC	Unbundled REC
What you buy	Electricity + REC together	REC only; electricity comes from your normal supply
Typical routes	Power purchase agreement (PPA), utility green tariff, community solar, green retail plan	Online REC retailers, brokers, corporate REC purchases
Price	Built into the power price	Cheapest form of green power claim
Link to new projects	Often strong (long-term PPAs help finance new plants)	Usually weak, especially for old projects
Credibility	Higher	Depends on vintage, location and certification

Compliance vs voluntary REC markets

RECs trade in two markets: compliance markets, where utilities must buy them to meet state law, and voluntary markets, where companies and households buy them by choice.

• Compliance market. About 30 states plus Washington DC have a renewable portfolio standard (RPS) or clean energy standard that requires retail suppliers to source a rising share of electricity from renewables. Suppliers prove compliance by retiring RECs that meet that state’s eligibility rules, or else pay an alternative compliance payment (ACP), which effectively caps the REC price. Many states have a solar carve-out with its own, more expensive certificate (the SREC).
• Voluntary market. Businesses, universities and households buy RECs to back renewable electricity claims, sustainability reports or “100% renewable” pledges. The EPA’s Green Power Partnership and certification by Green-e, run by the Center for Resource Solutions since 1997, set the main US quality rules for this market.

How much are renewable energy credits worth?

REC prices range from a few dollars to several hundred dollars per MWh, depending on whether a state law requires them, the technology and the vintage. Plentiful voluntary wind RECs are cheap; scarce solar RECs in carve-out states are expensive.

Market (vintage)	Approximate price	Source
New York wind RECs (2025 vintage, voluntary)	~$4.50 /MWh	S&P Global, Aug 2025
NYSERDA Tier 1 voluntary pre-sale (2026 vintage)	$23.96 /MWh	S&P Global, Aug 2025
New York Tier 1 RECs (compliance year 2024)	~$41 /MWh	S&P Global, Aug 2025
New Jersey legacy SRECs (2025)	~$160–188 /MWh	Flett Exchange, 2025
Washington DC SRECs (2025–2027 vintages)	~$360 /MWh	S&P Global, 2025

Sources: S&P Global (New York), S&P Global (DC), Flett Exchange. Prices move monthly; check a broker or the state program administrator before buying or selling.

What does it cost to cover a home with RECs?

Covering an average home’s electricity with cheap voluntary wind RECs costs only tens of dollars a year. Worked example, with the assumptions shown:

• Annual use: 10,000 kWh = 10 MWh = 10 RECs
• Price: assume $2–5 per REC (voluntary wind, before retailer markup; an estimate based on the New York wind price above)
• REC cost: 10 × $2–5 = $20–50 a year

Retail green power programs typically charge more than the wholesale REC price because they add marketing, certification and administration. By comparison, the electricity itself costs about $1,820 a year at the US average of 18.2¢/kWh; run your own numbers in the electricity cost calculator.

What are solar renewable energy credits (SRECs)?

An SREC is a REC created specifically by solar generation, usually for a state solar carve-out; one SREC is issued for each 1 MWh a solar system produces. Because state laws require utilities to buy a fixed number of them, SRECs have historically been worth far more than ordinary RECs and have helped pay back residential solar in states such as New Jersey, Maryland, Pennsylvania, Massachusetts and Washington DC.

How a homeowner earns them:

1. Register the system with the state program and the tracking registry (often handled by the installer or an aggregator).
2. Report production. A typical 7 kW rooftop system in the Mid-Atlantic produces roughly 8–9 MWh a year, so it earns about 8–9 SRECs annually. Estimate your own output with the solar panel calculator.
3. Sell them on the spot market through a broker, or lock in a multi-year contract for a lower but predictable price.
4. Give up the green claim. Once you sell your SRECs, the buyer owns the solar attribute. You are still using the electricity your panels make, but you can no longer claim to be solar powered.

Worked example: 8.5 SRECs × $360 (DC, 2025) ≈ $3,060 a year; 8.5 × $170 (New Jersey legacy) ≈ $1,450. In most states without a carve-out, residential RECs are worth little and are often assigned to the utility under net metering or incentive rules. See how solar panels work for what determines that annual MWh figure.

RECs vs carbon offsets: what is the difference?

A REC represents 1 MWh of renewable electricity; a carbon offset represents one metric ton of CO2-equivalent emissions avoided or removed. The EPA draws that line explicitly, and the two are not interchangeable (EPA).

	Renewable energy credit (REC)	Carbon offset
Unit	1 MWh renewable electricity	1 metric ton CO2e reduced or removed
Used for	Electricity claims (Scope 2 emissions)	Any emissions (Scope 1, 2 or 3)
Proves	Renewable generation occurred	An emission reduction relative to a baseline
Additionality required?	No	Yes, in credible standards
Typical issuers	Grid tracking systems (ERCOT, PJM-GATS, M-RETS…)	Offset registries (Verra, Gold Standard, ACR, CAR)

How do companies use RECs for emissions reporting?

Under the GHG Protocol’s 2015 Scope 2 Guidance, companies report electricity emissions twice: once using the average grid mix (location-based) and once using contracts such as RECs (market-based). The market-based figure can fall to near zero if a company retires enough RECs to match its usage (GHG Protocol).

The guidance set quality criteria that contractual instruments must meet, including that each MWh is claimed only once and that the instrument comes from the same market as the electricity use. Corporate “100% renewable electricity” pledges, such as those under RE100 or the EPA Green Power Partnership, rely on this market-based accounting.

Are renewable energy credits greenwashing?

RECs themselves are a legitimate tracking tool, but cheap unbundled RECs can let a company report emission cuts that did not happen in the atmosphere. That is the core of the greenwashing debate.

The main evidence: a 2022 study in Nature Climate Change examined 115 companies with science-based targets. Counting RECs, their combined Scope 2 emissions fell 31% between 2015 and 2019; without RECs, the cut was only about 10% (Bjørn et al., 2022). The authors argued that low-cost RECs rarely cause new renewable capacity to be built, a property called additionality.

Why that happens:

• A wind farm built in 2005 already sells its power; selling its RECs for $2 does not change whether it runs.
• RECs from a sunny afternoon in Texas can be matched against a factory running at night in a coal-heavy grid.
• Cheap RECs can make buying them more attractive than cutting energy use.

What makes a REC claim more credible:

Practice	Why it is stronger
Bundled RECs from a long-term PPA	The contract helps finance a new plant
Recent project vintage	Signals new capacity rather than old hydro or wind
Same grid region as the load	The renewable power actually displaces local generation
Hourly (24/7) matching	Matches clean supply to demand hour by hour, not just over a year
Third-party certification (Green-e)	Verifies no double counting and correct disclosure
Efficiency first	Cuts the MWh that need covering in the first place

The US Federal Trade Commission’s Green Guides also say marketers should not make unqualified renewable energy claims based on RECs without clear disclosure (FTC, 16 CFR 260.15).

How to buy renewable energy credits

Households can buy RECs through a utility green power program, a retail green electricity plan or a Green-e certified REC retailer. Companies usually buy through brokers, PPAs or green tariffs. A practical checklist:

1. Calculate your MWh. Add up 12 months of kWh from your bills and divide by 1,000. The kWh calculator helps if you are estimating appliance by appliance.
2. Prefer bundled options (community solar, utility green tariff) where available.
3. Check certification. Look for Green-e Energy certification and a stated technology, location and vintage.
4. Make sure RECs are retired on your behalf, and ask for a retirement report or attestation.
5. Describe the claim accurately, e.g. “we purchased RECs equal to 100% of our electricity use”, not “our office runs on wind”.

Renewable energy certificates around the world

The REC concept exists in most electricity markets, under different names:

Region	Instrument	Notes
United States, Canada	REC (and SREC for solar)	Regional tracking systems; Green-e certification
European Union	Guarantee of Origin (GO)	Required under the EU Renewable Energy Directive for supplier disclosure
United Kingdom	REGO (Renewable Energy Guarantees of Origin)	Issued by Ofgem
Australia	LGC and STC	Large-scale generation certificates and small-scale technology certificates
India	REC	Traded on power exchanges
Many other countries	I-REC	International standard used across Asia, Latin America and Africa

History of renewable energy credits

Year	Milestone	Source
1997	Center for Resource Solutions launches Green-e certification for retail green power	Green-e
1999	Texas Senate Bill 7 restructures the power market and mandates 2,000 MW of new renewables, supported by a REC market	BEG, UT Austin
2000	PUCT appoints ERCOT as Program Administrator of the Texas REC trading program	BEG, UT Austin
2001	Texas REC program takes effect (July 1)	PUCT rule 25.173
2005	Texas SB 20 raises the target to 5,880 MW by 2015 and 10,000 MW by 2025	BEG, UT Austin
2015	GHG Protocol Scope 2 Guidance sets market-based accounting rules for RECs	GHG Protocol
2022	Nature Climate Change study questions the integrity of REC-based corporate targets	Bjørn et al.

Texas hit its 10,000 MW goal years early, which is one reason its wind RECs now trade for so little: supply far exceeds the mandate.

Do RECs actually help renewable energy grow?

Compliance RECs clearly helped: state mandates with REC markets drove much of the early US wind and solar build-out. Cheap voluntary RECs help far less, because their price is too low to change investment decisions. A $2/MWh REC is a rounding error against the cost of building a wind farm; a $360/MWh SREC can pay back a rooftop system several years sooner.

The fair verdict is that a REC is an accounting tool. It is as good as the claim built on it. If your goal is more clean power on the grid, the most direct actions are buying from new projects, installing your own solar panels, and using fewer kWh. Explore the rest of the cluster in our guides to clean energy, renewable energy sources and the advantages of renewable energy.

Scientific and standards references

• Bjørn, A., Lloyd, S. M., Brander, M. & Matthews, H. D. (2022). Renewable energy certificates threaten the integrity of corporate science-based targets. Nature Climate Change. doi:10.1038/s41558-022-01379-5
• World Resources Institute & WBCSD (2015). GHG Protocol Scope 2 Guidance. ghgprotocol.org
• US Federal Trade Commission (2012). Guides for the Use of Environmental Marketing Claims, 16 CFR 260.15. eCFR

Bottom line

A renewable energy credit is the receipt for 1 MWh of renewable electricity. Utilities buy RECs because state law requires it; companies and households buy them to back green claims; solar owners in carve-out states can sell SRECs for real money. Prices run from a few dollars to over $350 per MWh. Used with bundled contracts, new projects and honest wording, RECs are a sound tool. Bought cheaply in bulk to cover a footprint on paper, they mostly change the report rather than the grid.