Last year was a record year for solar in the United States. The overall solar market grew 30 percent over 2013, and accounted for a third of all new generating capacity in the U.S., second only to natural gas.

According to a new ranking from the Solar Electric Power Association (SEPA), Pacific Gas & Electric integrated the most new solar capacity in 2014. The California utility installed more than 1,500 megawatts (AC) of solar in its service territory last year, the equivalent to powering more than 320,000 homes. At its current growth rate, PG&E connects a new solar customer about every 11 minutes.

California’s other two investor-owned utilities -- Southern California Edison and San Diego Gas & Electric -- ranked No. 2 and No. 3, respectively. Duke Energy Progress and National Grid rounded out the top five spots. Utilities on the top 10 list for annual solar capacity additions accounted for 72 percent of all new solar interconnections to the grid last year.

While behind-the-meter solar installations are seeing unprecedented levels of adoption, utility-scale solar continues to deliver the majority of new solar capacity. In the fourth quarter of 2014 alone, utilities installed 1.5 gigawatts (DC) of solar, the largest quarterly total ever for any market segment.

2014 utility solar leaders (MW-ac)

SEPA also ranked utilities based on the amount of solar added per customer in 2014. Pickwick Electric Cooperative in Tennessee, the Farmers Electric Co-Op in Iowa, and the City of St. George Energy Services Department in Utah claimed the top three places, respectively. 

“The achievements of small cooperatives such as Pickwick underline solar energy’s momentum across the United States. The market is no longer confined to California or a few other states,” said Julia Hamm, SEPA’s president and CEO.

While California, Arizona and New Jersey have led the country in solar activity to date, North Carolina, Hawaii, Massachusetts and Colorado have also become hotbeds for solar in recent years. Solar markets are now also cropping up in unexpected places like Montana, home to the Big Horn County Electric Cooperative, which has one of the highest levels of cumulative solar on a watts-per-customer basis.

Top 10 solar states (in MW added in 2014)

The U.S. solar market is undoubtedly on an upswing, but the future of solar and the role utilities will play in that future remains somewhat uncertain.

In a 2014 survey of utilities, SEPA found that 28 percent of respondents said they own solar or issue requests for proposals for solar projects. Three-quarters of respondents are planning or already offering utility-managed community solar programs, a 20 percent increase over 2013. And 78 percent of respondents said they’re implementing or planning to modernize ratemaking to better manage the increase in distributed energy resources.

Some utilities are also changing their internal structures to offer improved services around the integration of solar, as well as other grid-edge technologies like energystorage demand response, microgrids and electric vehicles.

“Utilities are beginning to think much more holistically about offerings for their customers,” said Hamm. “It’s not just about solar in a silo anymore; utilities are really starting to think about -- both from a grid management perspective, but also from a customer perspective -- how to put together a suite of solutions.”

Innovating to meet customer demand for clean, affordable electricity is likely to remain a key business issue for utilities in the coming years, according to SEPA. Utilities will also have to adjust their business practices and technical planning procedures as solar increasingly becomes the least-cost energy generation option.

Market forecasts for solar build-out are another concern. Hamm said she expects utility-scale solar to see significant growth this year and next year, as utilities try to get as many projects in the ground as they can before the solar investment tax credit for utility-scale projects expires at the end of 2016. Forecasts show a sharp drop in solar build-out in 2017, unless the incentive is extended.

In this context, utilities generally see themselves facing a “big frickin’ wall,” a massive barrier separating today's business models from emerging visions for the future, according to Hamm. SEPA launched the 51st State Challenge to try to help the industry come up with new, more sustainable market designs.

“There are going to be many short-term approaches to rate issues, and I think to a large degree that’s what we’re seeing now with fixed charges,” she said. “But I think people are also starting to think about what’s on the other side of the wall and how we get there. Those changes are going to be much more revolutionary.”