When it reports on its earnings tomorrow, hydrogen fuel cell pioneer Plug Power (NASDAQ:PLUG) will almost certainly tell us that 2004 has been a tough year. This leader in the field of producing clean, smog-free power at stand-alone power stations competes directly with rival FuelCell Energy (NASDAQ:FCEL) and, to an extent, also with Canada's Ballard Power (NASDAQ:BLDP) (although Ballard focuses more on fuel cells for the automobile market). But so far, all three of these companies compete more for government research dollars than for actual consumer sales.

Fuel cells, you see, are not yet commercially viable means for producing energy cost-effectively. There are problems with making the things work, of course, although these pioneers are doing a good job on that front. Future obstacles to overcome will include finding economical means of producing hydrogen gas for use as fuel, coming up with safe ways to transport the gas to fueling depots, and, for that matter, setting up a new distribution system for the fuel.

But first things first. The "first thing" remains researching better and better ways to manufacture smaller and smaller fuel cell stacks to generate power. Such research costs money, though. And until that money starts rolling in from real customers paying cash dollars for value-added goods and services, Plug Power and its peers may not be burning petrol products, but they sure are burning cash.

So as investors, what we'll primarily be looking for in Plug's report tomorrow will be:

  • How much of last quarter's $75 million in cash and equivalents remains in Plug's coffers?

  • Derivative of that, how quickly is Plug burning through that cash? At last report, the company was losing about $8 million per quarter -- not a trend likely to benefit investors. We won't expect to see any kind of a profit tomorrow, but any slowing in the cash burn rate will count as "good news."

What we will most emphatically not focus on is "record revenues," "best sales quarter in our history," or any similar PR department nonsense. Selling lots of goods and services at a loss is bad. Increasing the volume of such money-losing revenue is worse. Case in point: Last quarter, Plug raked in $3.3 million in revenue from performing research and development projects. Good news? Hardly -- because it cost Plug $4.3 million to do the research.

So to quote and expand upon a famous Nixon-era maxim, when reviewing Plug's news tomorrow, the key will be to not get distracted by any PR hype, but instead just: "Follow the money."

Learn more about this Rule Breaking technology on our very own Fool boards, populated by individual investors like you, Fools well-versed in the details of fuel cells and happy to share their insights. You can find them at Fuel Cells and Fuel Cell Primer.

Fool contributor Rich Smith has no interest in any of the companies mentioned in this article. The Fool has a disclosure policy.