IN MID-1979, the president announced a program designed to encourage utilities to convert from the use of oil to coal. The government had announced such plans several times before -- encouraging switches among various different fossil fuels. But this plan, in keeping with the country's rising level of dependence on imported oil, carried the added feature of a large financial subsidy. The proposed legislatin involved the expenditure of $12 billion in government funds to cut in half the utilities use of oil by 1990.

The bill got entangled in the legislative battles of 1979-80 and was never passed. Yet, according to figures compiled by the National Coal Association, half of the proposed 10-year target was achieved in the 11 months ending last June, without the expenditure of a dollar of government money.

There is other good news implicit in the large utility switch from burning oil to coal. it is that the change in fuels saves money even when the cost of environmental controls is included. Calculations by the Environmental Protection Agency and the Department of Energy and several non-government studies suggest that in every region of the country all but the very oldest oil plants can be converted to coal, equipped with the best avaiable pollution control devices and still yield substantial savings in the cost of the coal-generated electricity. Moreover, advanced pollution control technologies now in the development stage promise much greater effectiveness at less cost.

These facts hold out no solution to the energy problem. Utilities account for only a small fraction of total oil consumption, and there are many serious barriers to making greater use of the nation's massive coal reserves. Moreover, existing clean air requirements do not include the costs of controlling pollution from acid rain, of restoring strip-mined land, preventing miners' black lung disease or the many other costs associated with the greater use of coal.

Nevertheless, the experience of the past year in the utilities' unaided switch from oil to coal provides some useful clues for the new administration's energy prices began to rise in 1972, government policy has consistently underestimated both the speed and the degree of flexibility of the marketplace in responding to energy price changes. Price increase cannot do everything, but it appears that large government subsidies should not be necessary and that energy technolgies that require such help are unlikely to be competitive with the many alternatives that do not. The other is that an adequate energy supply -- and, over the long run, the only cost-effective energy policy -- need not require the abandonment of environmental protections.