(FORTUNE Magazine) – After those Seventies shocks, OPEC and Three Mile Island, abundant U.S. coal is the fuel of choice for the country's utilities. Some of the coal is low in sulfur, and some of the smoke gets scrubbed, at a cost of $2.5 billion annually. The industry's sulfur dioxide emissions have fallen 18% since 1973. But environmentalists and Congressmen who view utilities as a culprit in the acidification of lakes want a further clampdown. Almost no sulfur or nitrogen oxides are emitted by a demonstration plant that went on line in 1984 at Daggett, California. This so-called combined- cycle plant first converts coal to gas, which is burned to produce electricity. The leftover heat turns a steam turbine, producing bonus electricity and raising overall efficiency. ''This is the future of clean coal,'' says vice president Dwain Spencer of the Electric Power Research Institute (EPRI) in Palo Alto, California, a utility industry research group. Funds for the plant, named Cool Water, came from EPRI and such companies as Texaco and Bechtel. That's no solution, however, for old plants polluting at unacceptable levels. Two new techniques for muzzling existing plants are being tested at EPRI's new $21 million High Sulfur Test Center near Buffalo, New York. Both are only one-third to one-half as expensive to build as the dominant type of scrubber. But they cut sulfur dioxide emissions by as little as 50%, and are no help in curbing nitrogen oxides. Better results would come from ''repowering'' boilers. Instead of adding on scrubbers to catch the pollutants after combustion occurs, the utilities would modify the burning process itself with fluidized-bed combustion (FBC). By floating burning coal and limestone on jets of air, an FBC plant can keep 95% of coal's sulfur from reaching the sky, all the while creating very little nitrogen oxides. Kurt Yeager, who is a vice president at EPRI, puts the capital costs of repowering at $500 to $1,000 per kilowatt of capacity -- far less than the $1,500 required to build a new coal-burning plant from scratch, though more than the $200 to $300 cost of add-on scrubbers. About 75 demonstration-scale FBC installations are running or are under construction around the U.S. The FBC process also can be used with combined-cycle plants. American Electric Power, the nation's second-largest coal user, is building a demonstration-scale combined-cycle FBC near Steubenville, Ohio. Says a spokesman: ''We think this is the hope and future, the answer to clean air.''

CHART: NOT AVAILABLE CREDIT: SOURCE: EDISON ELECTRIC INSTITUTE CAPTION: Made in America Sources of Electricity DESCRIPTION: Percentages of electricity produced in United States from coal, nuclear power, hydroelectric power, gas and oil in 1972 and 1987.