A Solar Renewable Energy Credit (SREC) is created every time a person or business creates 1000 Kilowatt Hours of renewable energy. Non-renewable energy producers (i.e.,  your local electric company) are manadated to buy renewable energy credits instead of actually having to produce clean energy themselves.

It all starts with Renewable Portfolio Standards (RPS) laws that vary from state-to-state. They require utilities to add renewable energy to their portfolio of power generating technologies. In other words, utilities are required to use renewable energy for a certain percentage of their generated power. The RPS required percentages vary in different states, and are phased-in over varying lengths of time.

More than 50% of the U.S. states have established an RPS. The exact details of how it works varies by state, however the concept is basically the same in all states that have RPS mandates.

The value of the solar renewable energy credits, can be quite substantial. In New jersey, they are worth $200.00 per SREC (February 2012).