In this paper, we show how to conduct fast and complete oxidation of aluminum of any size in water without any additional chemicals and no extreme temperatures. Using a simple and easily repeatable experimental procedure, we studied the oxidation of coarse aluminum granules in distilled water at temperatures of 250 degrees C to 400 degrees C. We present the results of the oxidation experiments as well as structural analysis of the solid products by X-Ray Diffraction and Scanning Electron Microscopy. For the first time, we have shown that aluminum is oxidized more effectively in gaseous steam than in liquid water (at same temperature). The rate of aluminum oxidation in steam increases with increasing temperature and steam pressure. Conversion degree of aluminum granules with the size of about 1 cm was 0.93 at 300 degrees C after 4 hours; 0.96 and 1 at 350 degrees C after 2 and 4 hours, respectively; 0.81 and 0.99 at 400 degrees C after 1 and 2 hours, respectively. We showed that in liquid water, aluminum oxidation penetrates just a few microns into the aluminum and the reaction stops. Unlike liquid water, steam can easily penetrate through the porous layer of the solid oxidation product. We also discuss energy generation strategies for aluminum-water reactor and propose principal schemes of aluminum-fueled power plants.