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What's happening: Shares of SolarCity Corp (NASDAQ:SCTY) plunged as much as 13% today as a number of factors drove investors away from the stock.

Why it's happening: Two market events are hurting SolarCity today. The first is the market's overall decline, which normally hurts solar stocks more than the average stock because they're highly volatile. The second is the falling price of oil, which is down 3% today and has broken $40 per barrel for the first time since 2009.

More concerning for SolarCity were reports that its biggest competitor, Vivint Solar, has pulled out of Nevada after utility NV Energy said it was nearing the 235 MW cap for net metered residential solar projects. There's a lot of confusion over what's going on in Nevada, but if the cap is indeed being approached, it will stop the industry in its tracks, which could be terrible for SolarCity. The company had two operations centers and 1,100 employees in Nevada as far back as March, so if that market dries up it could be very costly to the company.  

Combine the market's decline today and the news out of Nevada and you have a formula that's caused SolarCity's stock to sink today.

The market's whims can be brushed off by long-term investors today, but Nevada is worth keeping an eye on. SolarCity is facing challenges to net metering -- which SolarCity uses to offset utility electricity costs and save consumers money -- across the country, and in Nevada there is a challenge to net metering, but the reprieve until the industry hit the 235 MW installed figure was supposed to give regulators time to hammer out a long-term rate structure for residential solar. If current accounts are correct, it looks like the cap was hit much faster than the early 2016 timeline most in the industry had projected. Vivint Solar's pullback in the state shows that it sees no return there, at least short-term.

Follow the solar industry long enough and you'll realize that ups and downs in specific markets is common and Nevada just seems to be the latest to go through some uncertainty. Long term, I don't think it's a huge threat to SolarCity's business, but it does highlight a risk in owning the entire supply chain and the staffing that's involved.

What investors should keep an eye on going forward is what management has to say about the Nevada situation during the third quarter conference call, and how regulators rule in the next NV Energy rate case. If the ruling is favorable to solar, the industry could boom once again, but if it isn't, then SolarCity could have to reduce its staffing in the state. Those adjustments could be painful for SolarCity, but they're just par for the course as the solar industry ebbs and flows long-term.

Travis Hoium has no position in any stocks mentioned. The Motley Fool owns and recommends SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.