Hawaii fell in its national rank for rooftop solar as residential installations slowed because of Hawaiian Electric Co.’s backlog of system approvals, a new study showed.

Hawaii’s ranking for residential rooftop photovoltaic installations plunged to fifth in the nation last year from the second spot in 2013, despite 2014 marking the largest year to date for national growth in solar installations and a consistent national increase of home solar across the U.S., according to data from GTM Research, a division of Greentech Media that provides solar market analysis.

According to U.S. Solar Market Insight, a quarterly publication from GTM Research and the Solar Energy Industries Association, Hawaii installed 61 megawatts of residential solar in 2014, down from 83 megawatts in 2013.

It was the first time Hawaii’s residential solar market had shown a significant decline, said Cory Honeyman, analyst at GTM Research and lead author of the U.S. Solar Market Insight report.

"Hawaii has been a long-established driver for demand for residential solar dating back to 2010 from when we began actively tracking individual states. Every year Hawaii’s market has grown," Honeyman said, adding that "2014 was the first year we saw the market drop year-over-year for residential solar in Hawaii."

The drop is rooted in Hawaiian Electric Co.’s backlog of photovoltaic system applications after the utility changed its policy in 2013, Honeyman said.

In September 2013 HECO began requiring customers and contractors to be approved by the utility before installing PV systems. The utility said that was meant to address potential safety and reliability concerns in areas where there are high numbers of rooftop solar systems connected to the electrical grid.

"There are still thousands of customers right now waiting for a response form HECO," he said.

In October HECO submitted detailed plans to "clear the queue" in a letter to the Public Utilities Commission.

There were 2,749 customers waiting to connect in October because they live in high-saturation areas. HECO said it would approve the majority of those by April and the remaining by December.

HECO spokesman Darren Pai said in an email Monday that the utility wants to continue increasing solar interconnection in a way that is safe and fair.

"Hawaii continues to lead the way in the adoption of solar energy with 12 percent of our customers with rooftop PV systems, more than 20 times the national average. Almost 11,000 systems were interconnected in 2014 alone," Pai said. "While there are technical challenges that come with integrating such unprecedented levels of rooftop PV, we have committed to clearing the pending list of customers who have been waiting for approval. We’re also pioneering technical solutions ahead of the rest of the country. Working with partners like SolarCity and the National Renewable Energy Labs, we have identified solutions for integrating even higher concentrations of PV. We want to see PV continue to grow in ways that are safe, sustainable and fair to everyone."

Also Monday, Marco Man­gels­dorf, president of Hilo-based ProVision Solar Inc., reported the number of monthly rooftop solar permits issued by the Hono­lulu Department of Planning and Permitting fell by 40 percent in February.

February marked the 22nd straight month of year-over-year declines, Man­gels­dorf said. There were 343 rooftop photovoltaic permits issued in February.

The top PV installer was American Electric Co., with 70 permits pulled in February, followed by Alternate Energy Inc. with 63 and Bonterra Solar Services with 55, according to Man­gels­dorf.

The declining number of permits has led to a bleak future for the solar industry, Man­gels­dorf said.

"Electrical Solutions, one of the early pioneers in installing solar electric systems in the state, including the large PV project on the Ala Moana shopping center, went into bankruptcy recently," he said. "If these kinds of numbers keep up, there will likely be more such filings."

The growing tension between the solar industry and HECO is due to the technical difficulties HECO is facing that are five to 10 years ahead of the rest of the nation, Honeyman said.

"(HECO) is at the forefront of every single challenge facing the solar market," said Honeyman, the solar market analyst. "Hawaii stands alone in the level of PV penetration on its grid compared to any other utility right now. These are challenges being dealt with right now" in Hawaii, while in other states they are merely "being theoretically debated."

The state leading the country in the amount of residential solar installed in 2014 was Cali­for­nia, followed by New York, Arizona, Massachusetts and Hawaii.

Across the U.S., solar has experienced consistent growth over the past three years, posting annual growth rates of more than 50 percent in 2012, 2013 and 2014, the report said.

The U.S. installed 6.2 gigawatts of solar photovoltaic in 2014, up 30 percent over 2013, making 2014 the largest year ever in terms of PV installations with more than one-third of all total operating PV capacity in the nation installed in 2014, the report said.