“How do we know we’re not in a cleantech bubble?� This is a question David Chen gets asked a few times a week. Chen is Morgan Stanley’s Head of West coast Clean Technology Banking and he spoke in Menlo Park last Friday at an AlwaysOn breakfast event, a warm-up for their GoingGreen event in September. So, how do we know we’re not in a cleantech bubble? David answered that question:

• The end markets are real and large.

• Investors are more discerning.

• The tremendous amount of capital required means fewer “me-tooâ€? stories.

• The coming grid parity environment can sustain multiple winners.

Nevertheless he still sees “volatile stocks driven more by momentum than fundamentals� as bankers and investors engage in an “obsessive quest for the next First Solar.� He had a few more choice observations: On M&A:

• “You’re going to continue to see industrial companies buy their way into the solar market,â€? he said, citing the Bosch acquisition of Ersol.

• “We’ll see more vertical integration in solar,â€? he said, in regards to SunPower’s acquisition of PowerLight.

• “Look for more ethanol roll-ups as buying underperforming ethanol firms becomes cheaper than creating them.â€?

• “Expect big auto to invest in EV powertrain and battery technology.â€?

On IPOs:

• “We think 2009 will be the start of cleantech IPOs with the real activity happening in 2010.â€?

In closing he added that greentech “is the single largest opportunity for wealth creation since the industrial revolution.�