Exchange traded funds that track the solar industry are down more than 20% this year and the industry’s weakness is resulting in bankruptcies and consolidation.

Solar-cell prices have tumbled 42% in 2011 and have forced some firms to team up with competitors, report Ehren Goossens and Andrew Herndon for Bloomberg.

Competitors from China and diminished solar-energy incentives in Europe helped push Sunpower Corp (NasdaqGS: SPWRA) and Roth & Rau AG (R8R) to agree to takeovers.

“Weaker companies who did not get their product costs down to competitive levels are going to disappear,” said Christopher Blansett, an analyst for JP Morgan Securities, in the story. “They’ll be bought up. They’ll go away. There is significantly more supply of solar modules than demand.”

“The industry is ripe for consolidation,” Michael Schostak, director of business development and communications at Energy Conversion Devices Inc. (NasdaqGS: ENER), producer of thin-film solar laminates

Evergreen Solar (ESLR), which filed for bankruptcy, plans to auction itself off. [Evergreen Bankruptcy Rattles Solar ETFs]