What are the best states to install residential solar systems?
This question does not have a simple answer, as there are currently many states that have policies and incentives in place to support the installation of solar systems. Typically, a strong state solar market is determined by a combination of several things. Utility rates, incentives (tax credits, direct cash incentives, renewable portfolio standards, etc.), net metering policies and interconnection policies are all important. The allowance of third-party power purchase agreements as a financing mechanism also help stimulate a state solar market and open up the market to additional customers. At the utility scale, having a renewable portfolio standard with a solar carve-out is a really important driver of solar installations. This is typically less relevant for residential systems, though sometimes utilities will create solar rebate or performance-based incentive programs in order to meet their RPS requirements. For an overview of different solar policies and a description of their relative importance, see the DSIRE Solar Policy Guide.
Of course, the declining cost of solar modules has changed things a bit. Systems are now more affordable and incentives have stepped down in response to this. In 2010, the top 10 states that installed PV were CA, NJ, NV, AZ, CO, PA, NM, FL, NC, and TX. The top 10 states in cumulative, grid-connected PV capacity are CA, NJ, CO, AZ, NV, FL, NY, PA, HI, and NM. See more info on this in Larry Sherwood's report for IREC. The states with the most installed solar are not necessarily the best places to install solar going forward, but the states that have lots of installed solar generally also have supportive policies. There are, naturally, a few exceptions to this.