98-Year Old Hawaiian Company Plunges Into The Hydrogen Future

Hydrogen cars are having a tough time breaking into the mainstream market, partly due to the lack of fueling stations. That could change soon if a new project by the Hawaii-based company Servco works out. Servco is leaving nothing to chance: It's building Hawaii's first public hydrogen fueling station, and also selling the Toyota Mirai fuel cell EV to go with it.

So, will the gamble pay off?

Hydrogen is a risky bet...

More and more auto companies are willing to manufacture fuel cell EVs (FCEVs), but they are currently stuck in a classic chicken-and-egg loop. There are very few FCEVs on the road, so there is little incentive to build hydrogen fuel stations. Few drivers are willing to invest in a car that they can't fuel up conveniently, so it's back to square one.

That logjam is difficult to break for several reasons. FCEVs represent new, unfamiliar technology, they are generally more expensive than comparable gas-powered cars, and they are facing stiff competition from battery EVs for the zero emission market.

On top of that, hydrogen fuel stations are complex facilities that cost far more than a typical gas pump or EV charging station.

...but Servco has a good hand to play...

The odds seemed stacked against Servco, but the company does have several factors working in its favor.

One of those is corporate culture. Servco got its start as a two-car garage back in 1919 and grew into on of the top companies in the automotive sector. Automotive News slotted Servco into the #26 place in its 2016 list of top 150 dealership groups based on unit sales of new vehicles, and it is rated third among large employers in the 2017 Hawaii Business Magazine list of best large employers.

One key to Servco's success over 98 years is its ability to spot and resolve bottlenecks that keep potential customers apart from the things they want. That's a legacy of the company's founder Peter Funkunga, as described in a brief history on the company's website:

Back then, during depression–era Hawaii, families were having difficulty paying cash for purchase. Mr. Fukunaga responded by creating an affiliate to help customers finance their purchases. Today, we continue to demonstrate those principles through the brands and products we represent, and supporting them with excellent customer service.

Another indicator that Servco has placed its hydrogen bet carefully is its success in transferring lessons from the automotive sector into another significant aspect of big-ticket consumer purchasing, kitchen appliances and bath accessories.

...a good place to play it in...

The auto market in Hawaii also creates a favorable environment for car sales in general, and FCEVs in particular.

Back in 2014, Hawaii Business Magazine highlighted a unique trend in the state's motoring habits. Driving dropped by 7 percent across the US after peaking in 2005, a trend that is especially pronounced among millennials. However, driving has continued to climb in Hawaii.

A number of factors contribute to the trend, including the long commuting times that are typical of areas where expensive urban core real estate pushes more workers to live in outer suburbs and rural areas.

Hawaii's tourism industry also plays a role, as does the state's relatively high reliance on private schools that don't transport students by bus.

Mass transit in the state is improving and bicycling is also gaining popularity, so some industry observers don't expect the total number of cars in Hawaii to continue increasing (bearing that out, sales dipped in 2016).

However, if those who drive continue to spend more time behind the wheel, that could translate into greater demand for cars that can go longer between fill-ups. That's where FCEVs have two important advantages over their battery EV cousins: range and refill speed.

The Mirai, for example, has a range of 312 miles according to fuel economy information compiled by the U.S. Environmental Protection Agency. That handily beats the range of 60-120 miles that EPA describes for typical battery EVs.

Some battery EV models are getting into the 200-300 mile range, and FCEVs begin to lose the range advantage at the upper end of that scale. However, they still have have an edge in terms of charging times.

FCEVs fuel up quickly, just like conventional cars. New technology has whittled down the time it takes to fully charge an EV battery, but even today's fast-charging stations take significantly longer than a hydrogen fill-up.

According to the Associated Press, Servco is anticipating that the new fueling station will begin operating in 2018, at which time it will have a fleet of Mirai's ready for eager customers at a price in the $50,000 range with free fuel for three years thrown in.

Servco also plans to make the station available to any other fuel cell EV, including the growing number of fuel cell buses in the state, helping to generate good will and publicity.

Also helping on the public relations side is the company's long relationship with Toyota, which has devoted much time, money and energy to promote the Mirai. Toyota is looking beyond autos to envision entire communities powered by hydrogen.

...and the Hawaii deck is stacked in favor of hydrogen.

One additional factor that makes Servco's hydrogen gamble a good bet is Hawaii's emerging hydrogen culture.

Hawaii has an ambitious plan to achieve 100 percent renewables for power production by 2045, and fuel cells are part of the mix.

To be clear, the 100 percent goal does not include transportation fuels, but fuel cells do come into the mix for non-mobile electricity generation. To that end, Hawaii has been aggressively pursuing hydrogen fuel, enlisting numerous stakeholders including private companies, federal agencies and academic institutions.

FCEVs are getting the benefit of the ripple effect, and current Governor David Ige is supporting the fuel cell movement with a vigorous publicity trend. He has been known to tool around in a Mirai, and he was the featured speaker at a groundbreaking ceremony for the new Servco station last week.

All that hard work is paying off. Last year the Department of Energy produced a state-by-state rating of hydrogen and fuel cell activity, and Hawaii came in fifth behind California, Connecticut, New York and Colorado. That's pretty impressive for a state that came in 40th for population as of last year.

One of the points highlighted by the Energy Department was Toyota's decision to tap Hawaii as one of the first two U.S. states to receive deliveries of the Mirai (California was the first) in 2016.

DOE also noted the plans for the new Servco station, and the use of hydrogen for FCEVs at two U.S. military bases.

Other activities described by DOE include a seaport fuel cell project spearheaded by Sandia National Laboratory and a new waste-to-energy system that could be modified for hydrogen production.  The state also has plans in the works for fuel cell buses and a hybrid energy storage system at Hawaii Air National Guard F-22 Campus among other projects.

One especially interesting project is being undertaken by Blue Planet Research, consisting of a hydrogen energy storage system with a 100 percent renewable micro-grid.

That project dovetails with Blue Planet's ongoing NASA contract, which involves deploying hydrogen as energy storage in a Mars Habitat micro-grid.

As excitement builds over the potential for the U.S. to send a mission to Mars, hydrogen will carve a deeper niche in the public conversation. That new burst of attention could spill over to the FCEV market.

After all, if you can't go to Mars, the next best thing might be driving a Mirai.

Photo: 2017 Mirai FCEV sedan via Servco.