SRECs exist as a result of a regulation known as the renewable portfolio standard (RPS). Renewable portfolio standards are state laws that require utilities to produce a specific percentage of their electricity from renewable resources. Nearly 30 states and Washington, D.C. have an RPS, and eight states have a renewable portfolio goal.
To meet their RPS requirements, electricity providers must obtain renewable energy certificates (RECs), which serve as proof that they have either produced renewable electricity themselves or paid someone who is producing renewable electricity for the right to “count” that electricity themselves. Many renewable portfolio standards also have a solar carve-out, which requires that a minimum percentage of electricity sales in that state come specifically from solar power. In those cases, SRECs are used to account for solar electricity production.