RECs are certificates used to track renewable energy. Every megawatt-hour of renewable energy that enters our regional power grid is assigned 1 corresponding REC. These RECs can be sold together with their corresponding energy, or separately—aka “unbundled.” Whichever utility buys unbundled RECs may use the credits to meet their renewable-energy obligations even if the actual power they buy comes from fossil fuels.
For example, if you buy 100 megawatt-hours of power from a coal plant, you can claim to be using renewable power as long as you also buy 100 RECs from a solar farm. Moreover, since the 100 RECs have been unbundled from the solar farm energy, the purchasers of the solar energy itself may not claim to be using renewable energy: the credit for the renewables has already been taken.