Renewable energy credits, or “RECs,” are accounting mechanisms used to track renewable energy production and provide proof that electricity has been generated from an eligible renewable energy resource and delivered to the electric grid. One REC represents one megawatt hour (MWh) of renewable energy. This system allows utilities to document their progress towards sustainability goals, such as fulfilling—or in the case of MCE, surpassing—the requirements of California’s Renewable Portfolio Standard program.
There are three types of RECs:
Category 1 (Bundled): RECs are associated and permanently attached (“bundled”) to renewable energy that is delivered from eligible renewable resources within California.
Category 2 (Bundled): RECs are associated and permanently attached (“bundled”) to renewable energy that is generated outside of California—but within the Western Electricity Coordinating Council (WECC)—and “firmed and shaped” upon delivery into the California grid by coupling it with an equivalent volume of energy from an alternative source, typically hydroelectric or natural gas.
Category 3 (Unbundled): RECs are associated with renewable energy that is generated within the Western Electricity Coordinating Council but are not attached to any physical energy. This category of REC allows businesses, organizations, and institutions to claim the environmental benefits of renewable energy generation to help satisfy the sustainability goals or requirements assigned by their local, state, or federal government.
EPA on Renewable Energy Certificates (RECs) (pdf)