What happened 

Shares of renewable energy stocks were down big today in a fairly strange trading day. Most stocks were still down significantly in the afternoon in a broad sell-off for the industry. 

ReneSola (NYSE:SOL) had one of the strangest days, falling 11% in the morning before climbing as much as 10.6% in the afternoon and closing 6% higher. SPI Energy (NASDAQ:SPI) dropped as much as 13.5% and Enphase Energy (NASDAQ:ENPH) plunged 5.3% at its low. SPI and Enphase were down 6% and 2.8%, respectively, at the end of trading. 

Solar and wind assets on a sunny day.

Image source: Getty Images.

So what

There were a number of factors affecting trading today. The first is that the market overall was down big early and was still down at the close. The Dow was down 0.9% and the S&P 500 was down 0.5%, even after both indexes recovered some from their daily lows. 

Another big factor in the drop was the fact that oil was down as much as 2.4% in early trading. Oil is a strange indicator for renewable energy stocks because it can send stocks lower or higher depending on the day. Today, falling oil prices sent most renewable energy stocks lower. 

Highly volatile stocks like ReneSola, SPI, and Enphase can drop rapidly just on a pullback in the market. But energy stocks overall were dropping today, pulling the entire industry down. 

Now what

Across the board, renewable energy stocks were down; these three just dropped more than most. And given the slight recovery in the market this afternoon, shares weren't down nearly what they were early in the day. 

The reality is that after a great November, the market is pulling back right now as investors take some profits, and that's a natural cycle in the market. So we shouldn't be surprised by the volatility. 

Long term, I think there are still a lot of tailwinds behind the renewable energy industry because costs have fallen far enough that it's competitive with fossil fuels. But ironically, renewable energy is competing against traditional utility fuels like natural gas, nuclear, and coal, not oil. And the daily moves of commodities don't affect renewable energy demand at all. 

You can chalk up today's move to normal volatility in renewable energy, which is par for the course in this industry. Investors would be wise to ignore the day-to-day volatility and focus on the long-term trajectory of the industry, which is toward higher volumes and lower energy prices.

On the other hand, profitability has been hard to come by for some companies, and it's only the renewable energy stocks that can be profitable long term that will drive market-beating returns, which is why Enphase is the only one of these stocks that's a buy today. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.