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Solar energy generating capacity in Massachusetts grew by 65 percent last year, making the Commonwealth one of the top states for solar projects, according to a report released Tuesday by Environment Massachusetts, an advocacy group.

With 198 megawatts of solar capacity installed by the end of 2012, Massachusetts ranked 7th among states in total solar capacity, the report shows. California held the top spot for total installed solar, with 2,901 megawatts of capacity; Arizona came in second, with 1,097 megawatts.

The state’s aggressive renewable energy policies and incentives have helped grow the local solar market, and Massachusetts has continued to add solar generation in 2013. Earlier this year, the state surpassed its goal to have 250 megawatts of installed solar capacity by 2017 several months ago – roughly four years earlier than expected.

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As of July 1, there were 281 megawatts of installed solar capacity in Massachusetts. The state has set a new goal for 1,600 megawatts by 2020.

“Massachusetts’ progress should make us confident that we can do much more,” said Rob Sargent, of Environment Massachusetts. “If you want your state to be a leader in pollution-free solar energy, follow Massachusetts’ lead and set ambitious but achievable goals and back them up with policies that work.”