Solar energy remains one of the fastest-growing sectors of the U.S. economy as its photovoltaics produced 66% more power in the first quarter of this year than during the same time last year, the industry reports Thursday.

By the end of March, all grid-connected solar installations generated more than 2.85 gigawatts of electricity, enough to power nearly 600,000 U.S. homes, according to the quarterly report by the Solar Energy Industries Association and GTM Research.

The two biggest factors driving this growth include reduced equipment costs and a rush to take advantage of federal tax credits that were expected to expire in 2010 but were extended through 2011. While residential installations show steady growth, commercial ones are posting the strongest gains.

“On the whole, the U.S. is currently the PV (photovoltaic) industry’s most attractive and stable growth market,” Shayle Kann, GTM Research’s managing director of solar, said in announcing the findings. He said the U.S. is positioned to nearly double its global market share this year.

The U.S. solar industry is concentrated in a few key states. California remains the largest, but New Jersey – now second – is experiencing the quickest growth. Other top states for PV installations, which directly convert solar power to electricity, include: Arizona, Pennsylvania, Colorado, New York, Massachusetts, Maryland, Oregon and Texas.

The report says the total U.S. solar market gained grew 67% in value last year to $6 billion – up from $3.6 billion in 2009 – and now employs 100,000 people.

The research comes as the U.S. Department of Energy announces $2 billion in conditional loan guarantees for two concentrating solar power (CSP) projects, which use sunlight to heat water or another fluid that generates steam to power a turbine.

The DOE is offering a $1.2 billion loan guarantee for the Mojave Solar Project in San Bernardino County, Calif., and $681.6 million for the Genesis Solar Project, located on land managed by the Bureau of Land Management in Riverside County, Calif.

At 250 megawatts each, the projects’ will double the nation’s current CSP capacity and displace a total of 40% of the output from a typical 500-megawatt coal-fired plant. They’re estimated to create a total of about 1,630 construction jobs and 114 operating ones.

“These projects represent an important step in the development of solar as an affordable, clean energy resource in this country,” Energy Secretary Chu said Wednesday in a statement. “By investing in the commercial-scale deployment of solar technologies, we can create greater efficiencies that will lower the cost of solar power while creating jobs and increasing our global competitiveness in this key industry.”