A Renewable energy credit (REC) is any tax credit offered by a local or federal taxation authority as an incentive for the installation and operation of renewable energy systems such as solar or wind power.
In the United States, as part of the new economic stimulus package, new renewable Energy Rebate Programs are in place. Residential and commercial customers may receive a lump sum cash rebate or, for larger systems, a five-year payback program from their local utility company. In addition, there is new 30% uncapped federal tax credit and state tax credits around 10%.
Renewable Energy Credit is one of two main outputs or benefits from generation of new power from renewable sources. Renewable power generation creates actual power in the form of electricity, and environmental benefits to society from “green” power production – such as minimizing pollution and slowing the rate finite fuel resources are used. The actual power is sold into the local grid, and the societal benefits are sold in the form of Renewable Energy Credits or “RECs”, sold separately as a commodity into the marketplace. While RECs are not actually a measure of power, each REC represents one megawatt hour (MWh) of renewable-generated energy. For each REC purchased the customer is able to claim the equivalent MWh of energy reduction as on offset to their conventional energy use.
Opponents declare that by using RECs a customer can claim energy “reduction” even if they do not actually reduce their end-use at all - or even increase it. Proponents counter that more REC purchases drive increased production of renewable power which can replace conventional production.