What best describes a Renewable Energy Credit (REC) and its use?

• A. A market-based instrument representing environmental benefits of renewable energy; used to meet energy goals or compliance
• B. A tax incentive for installing solar panels
• C. A grant for fossil fuel projects
• D. An insurance product for energy outages

Answer: (A)

Renewable energy credits are market-based instruments that represent the environmental attributes of electricity generated from renewable sources, typically one credit for each megawatt-hour of renewable energy produced. They can be bought, sold, or retired to show compliance with renewable portfolio standards or to support voluntary green-energy purchasing. This makes it possible for utilities and organizations to claim the environmental benefits of renewables and to meet policy goals or sustainability commitments, even if the actual electrons on the grid come from a mix of sources. They are not tax incentives, grants, or insurance products; they do not provide direct funding and aren’t tied to insurance against outages.