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October 18th 2017 print

Michael Kile

The Energy Minister’s Slip Is Showing

Having scoffed at power-market modelling, Josh Frydenberg drew comfort from 'expert'  projections he finds more useful in extolling the latest,  the very latest, clever scheme to keep the lights on, rent-seekers prosperous and electricity bills no higher than in 97% of the developed world

light bulbAnother day, another act, another light-bulb moment in Australia’ energy circus. Perhaps the great Austrian psychoanalyst was onto something after all. Freudian slip: an unintentional admission or slip of the tongue, regarded as revealing subconscious, repressed or devious feelings.

In his Autobiographical Study (1925), Freud argued that psychoanalysis

profits by the study of the numerous little slips and mistakes which people make—symptomatic actions, as they are called [...] I have pointed out that these phenomena are not accidental, that they require more than physiological explanations, that they have a meaning and can be interpreted, and that one is justified in inferring from them the presence of restrained or repressed impulses and intentions.

True. Josh Frydenberg’s slip was not in the same category as:

She: What would you like; bread and butter, or cake?
He: Bed and butter.

Nevertheless, it was instructive, revealing one of neuroses currently swirling in the body politic. Too many late nights, of course, combined with serious substance (your dollars) abuse, also affect the collective psyche, not to mention collective pocket, in the form of higher electricity bills and blackouts.

The Federal Energy Minister’s moment of truth came just one minute into his three-minute fifty-three second interview yesterday with ABC PM’s Linda Mottram.

According to the segment’s introduction, the government’s new policy includes:

a reliability guarantee requiring retailers to use a percentage of electricity from so-called dispatchable sources: coal or gas, batteries or pumped hydro. And there’s an emissions guarantee linked to the reliability guarantee. The government is touting it as technology neutral. It is adamant that households could save between $110 and $115 per year.

It all had an uncanny resemblance to that famous surrealist exhibit in Paris a century ago: the “handle-less knife lacking a blade”.  Be that as it may, here is Frydenberg attempting to explain the very latest “most effective and reliable policy”.

Frydenberg: Well, this is the advice from the Australian Energy Market Operator. It is important to understand that we sought and received the best advice available. That comes from the Australian Energy Security Board, the Australian Energy Market Operator, the Australian Energy Regulator and the Australian Energy Market Commission. Their combined wisdom and advice is that Australian households will see a savings on their power bill by $110 to $115 per annum, as a result of our policy; which is a higher number than the saving [only $90, dear reader, $90] that was promoted through the [Finkel] Clean Energy Target.

[The Finkel Report claims households would be ten per cent better off over 30 years, and heavy industrial power users twenty per cent better off.]

ABC PM: OK. You’ve taken advice. But do you have modelling and can you guarantee it?

Frydenberg: “Well, that’s the analysis of the AMEC. There will be further modelling that will be undertaken. But I am familiar with the saying of John Kenneth Galbraith that: ‘when it comes to modelling, it is designed to make astrology look good’. So it always depends on the inputs to get the outputs. But certainly the advice of the AMEC is that this will lead to lower power bills because it will create investment certainty, more investment means more supply, which means lower prices.”

But how can our energy minister, clearly so cynical about the reliability and accuracy of government agency model forecasts, be simultaneously so sanguine about the alleged future savings derived, he is prepared to promote them so enthusiastically in the public domain? How, indeed? (Very courageous of him, noted Sir Humphrey.)

That the alleged savings amount to less than the heart of a peanut is another matter. As AFR journalist Jennifer Hewett commented:

The estimate from the Energy Security Board that typical household bills will fall by an average of $110 to $115 a year between 2020 and 2030 is a result that should be taken with a large bucket of salt. Any precise dollar estimate of what will happen to bills over a decade counts as an exercise in absurdity.

Such is, as Freud might have said, the psychopathology of everyday life among the sultans of spin on Capitol Hill.

Incidentally, what Galbraith actually wrote was: “The only function of economic forecasting is to make astrology look respectable.”

As for light-bulb moments, some of the economist’s other quotes also seem worthy of the Cabinet’s attention at this point in time, e.g.:

“Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.”

 “It is a far, far better thing to have a firm anchor in nonsense than to put out on the troubled sea of thought.”

“Nothing is as admirable in politics as a short memory.”

“If all else fails, immortality can always be assured by spectacular error.”

Comments [4]

  1. Bill Martin says:

    Without claiming any serious understanding of the issue, it seems to my layman’s mind that there is a howling contradiction in the just announced energy policy of the government. Energy suppliers are mandated to guarantee a) reliable supply of dispatchable/baseload power and b) meet the emission reduction target required by the Paris Agreement. What happens when complying with one of those requirements means the breaching of the other? Which one will take priority? On the other hand, if that problem could never arise, as it appears to be implied, why the need for this policy at all?

  2. Alice Thermopolis says:

    Good post by David Uren in today’s Australian. Worth reading.

    Stunned by his comments:

    “The proposed emissions guarantee is the carbon tax you get when you ask a regulator to design one, leaving the government free to claim it is not adding to power bills while the costs of inefficient regulation are passed on to consumers.”

    “Although Energy Security Board chairman Kerry Schott said the guarantee did not set a price on carbon, meeting the target would have a cost that would be added to retail bills, just like a carbon tax. The ESB appears to accept this, commenting that “banking and borrowing” of emissions obligations would be allowed while retailers’ compliance with their guarantees was being assessed.

    They could also buy carbon credit units generated by farmers who reforest cleared land or international carbon credits to meet some of their obligation. This looks a lot like an emissions trading scheme confined to the electricity sector.”

    PM & Co even more Machiavellian than I thought.

  3. pgang says:

    When I first heard this I was immediately struck by the massive level of intervention of the government in this core market, and how it has been nothing but destructive, and how every intervention then and now is only going to make the situation worse. This started off as a John Howard brain fart, let’s not forget. Government is destroying western civilisation.

  4. Keith Kennelly says:

    Government by experts, the Managerial Elites is destroying Western Civilisation. Left and Right are the same elites as are bureaucracies, media and major corporations.

    Trump was the start of the fight back, as is Brexit, the new Goverment in Austria and Abbott will be next. With Turnbull carbon emissions scheme by stealth it’s now only a matter of time.

    NZ went backwards with their equalivant to the idiot Windsor.