California has hit a major milestone in renewable energy: State regulators reported Thursday that more than 1 gigawatt — or 1,000 megawatts — of solar power has been installed through the California Solar Initiative, which encourages homeowners, businesses, local governments and nonprofit organizations to install solar panels on their roofs.

San Jose alone has installed 54.6 megawatts on homes and commercial buildings, including those of eBay (EBAY) and San Jose Unified School District, making it California’s top solar city. San Diego is a close second, followed by Bakersfield, Fresno and Lancaster.

One megawatt is enough to power 750 to 1,000 homes. But because the sun doesn’t shine all the time, solar industry experts say that 1 megawatt of solar can power about 200 households.

Launched in 2007, the California Solar Initiative is an ambitious road map that calls for 1,940 new megawatts of solar power to be installed statewide by 2016. The 1,066 megawatts installed by the end of 2012 put the state more than halfway to that goal.

“California has the most customer-side solar installations of any state in the nation,” said Michael Peevey, president of the California Public Utilities Commission. “This is a tremendous milestone for California and a testament to the success of the California Solar Initiative.”

So far, 558 megawatts of solar power have been installed in PG&E’s vast Northern California territory. PG&E has more than 75,000 solar customers connected to the grid via net metering, which allows homeowners and businesses to offset the cost of their electric use with the rooftop solar power they generate and export to the grid. That’s more than any other utility in the country.

The goal of the state’s program is to help solar achieve what’s known in the renewable energy industry as “grid parity” — the much-awaited point where solar can compete with cheaper sources of energy such as natural gas. It offers financial incentives designed to decline over time as solar adoption becomes more widespread.

When the program launched in 2007, consumers could get rebates as high as $2.50 per watt that their solar system could generate. But the demand has been so strong that the incentive has fallen to just 20 cents a watt in PG&E territory.

“Incentives are falling quickly,” said Melicia Charles, solar program manager for the CPUC. “It’s happening much faster than many expected.”

PG&E noted that solar has been growing in popularity among its customers even as the size of the rebates shrink. The San Francisco-based utility is adding about 1,000 new net meter customers each month and argues that the current net metering policy needs to be revised.

“The robust response to the program, even as the rebates continue to shrink as planned, shows that solar can stand on its own,” said Denny Boyles of PG&E.

PG&E and other utilities argue that net metering subsidizes solar customers at the expense of other ratepayers and does not reflect the true cost of connecting solar customers to the grid. But solar industry advocates argue that California’s net metering policy is helping to drive solar adoption and reducing dependence on fossil fuels, resulting in cleaner air for everyone.

Contact Dana Hull at 408-920-2706. Follow her at Twitter.com/danahull.