Beyond the power purchase agreement, U.S. solar projects often earn revenue from renewable energy credits (RECs)—tradable certificates representing the environmental attributes of clean generation. For developers and investors, understanding REC markets is essential to building complete project economics.
What is a REC?
One REC typically represents one megawatt-hour of renewable electricity generated. When a solar project produces power, it creates both physical electrons and RECs. These can be sold with the power (bundled) or separately (unbundled), depending on offtake structure.
Buyers use RECs to:
- Meet state renewable portfolio standards (RPS)
- Satisfy corporate sustainability commitments
- Demonstrate additionality in clean energy procurement
SRECs and state-level markets
In states with solar-specific carve-outs—such as New Jersey, Massachusetts, and Maryland—solar renewable energy certificates (SRECs) trade at premiums to generic RECs. SREC revenue can represent a meaningful share of project returns in these markets.
Key variables:
- Compliance demand from utilities and suppliers
- Supply from new solar buildout
- Program rules on eligibility, vintage, and banking
Bundled vs. unbundled offtake
In a bundled PPA, the offtaker typically receives both energy and RECs. In unbundled or virtual PPA structures, REC ownership must be explicitly allocated—and valued—in the contract.
Misallocating RECs can undermine compliance claims for corporates and revenue forecasts for investors.
RECs in project finance
Lenders and tax-equity partners treat REC revenue differently depending on contract quality:
- Contracted REC sales with creditworthy buyers support bankability
- Merchant REC exposure requires conservative price assumptions and sensitivity analysis
Our underwriting process models REC revenue explicitly—not as an afterthought.
Federal credits and environmental attributes
Federal tax policy—including the phase-out of the ITC—interacts with state REC markets in complex ways. Tax credits and RECs are separate value streams: as federal credits wind down, contracted REC revenue becomes a more important pillar of project economics.
How Sunlight helps
Sunlight Energy Investments underwrites and operates solar projects across REC markets nationwide. We structure offtake and attribute sales to maximize bankable revenue for investors and developers.
To discuss project economics or REC strategy, explore our advisory services or contact our team.