The problem is size. A modern steam engine need not be any bigger than a modern diesel, indeed some people have built steam engines by converting internal combustion engines, but along with a steam engine you need a boiler, a condenser, a lot of pipework and pumps and, unless you oil-fire it, a substantial space for coal or wood fuel. Steam engines worked well for a long time on large ships, even relatively small ferries and tugs used them, but put one in a narrowboat and there was little room for cargo.
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