The current cost disadvantage of photovoltaics (PV) risks to reduce its relevance in climate policy strategies. Depending on the used assumptions, electricity from PV can become competitive between 2015 and 2040. Cost competitiveness is, however, a conditional criterion and as an alternative to the learning curve perspective, the future role of PV in electricity production is assessed from a portfolio theory or Capital Asset Pricing Model perspective. In this analysis, the focus is on the input price risks. Fossil fuel price volatility can strongly reduce the financial return of conventional generating technologies. From a welfare perspective, energy planners should try to minimise this risk by adding risk-neutral or no-risk technologies to their portfolio. With an analysis for the year 2025, we illustrate how the addition of renewable capacity to an existing portfolio can lower total portfolio risk without a significant reduction of profitability. PV then emerges as an attractive technology, especially once the best locations for wind energy are already developed. (c) 2006 Elsevier Ltd. All rights reserved.