I coined the phrase ‘Numeric Incompetence Syndrome’ a while back, and yesterday an article in my local newspaper delivered another glaring example. In summary…
South Australia’s connection to the national electrical grid is to be enhanced with a new 900km interconnector to New South Wales and Victoria. The capital cost is expected to be $1.53 billion. The article states: “To cover that, households would pay $9 a year in SA and $5 in NSW.”
Assuming an average household size of 2.7 persons (as in 2016 nationally), there are about 0.65 million households in SA and 3.11 million in NSW. So the total annual amount recovered from households would be ($9 x 0.65M) + ($5 x 3.11M) = $21.4 million. Even allowing for future population growth, this comes nowhere near “covering” an investment of $1.53 billion: to amortise such a sum over a 20-year life at a discount rate of 5%pa would cost $123 million per year, before considering any maintenance costs. So that’s error No.1.
The article goes on to say, “[ElectraNet] estimates the project would deliver overall benefits of $924 million over 20 years…” but adds that “the Australian Energy Regulator … has downsized the project’s 20-year benefit to $269 million.”
Who, in their right mind, would invest $1.53 billion in something that will deliver benefits of only $924 million over 20 years?! How can any sub-editor not see that this cannot be true?! Perhaps the word “net” was omitted, but surely “overall” was inserted to make clear that the writer means gross benefits.
My stroppiness is going off the scale. Journalism is not just about regurgitating people’s press releases; it has to involve some critical thought, some fact-checking, some exercise of common sense for heaven’s sake!
I have emailed the Editor of the newspaper with a link to this post and an invitation to respond and/or to publish a correction.
2 thoughts on “NIS Again: SA’s Interconnector”
Carrying on from “Those who can, do. Those who can’t, teach”, I think that “Those who can’t, go into politics” is a just comment.
There is already a word for numerical incompetence; “dyscalcula”, although I don’t really feel it covers everyone. Mine is more like dyslexia, mistaking the written number for another number and doing the calculation with the wrong one. My actual calculating was fine! I wish they had discovered the syndrome when I was at school; it would have saved me a lot of grief! Peeje42
The dominace of politicians over technocrats in Australia makes me wonder whether the numbers are indeed correct. Sadly, it is plausible that politicians would spend over a billion for (gross) benefits of less than a bilion.
A deeper question is how were the benefits estimated? Does this investment merely reinforce the transmission system, to avoid the circumstances that led to installation of the world’s biggest battery? If so, the benefits are avoidance of disruption to industry, commerce and households (which is an extremely high cost, when it happens) times the small probability of it happening.
Multiplying enormous numbers by tiny numbers provides lots of wiggle room for the analyst to get the desired outcome. So, why don’t the figures made public justify the project?