Higher shares of variable renewable generation have already raised the demand for energy storage and network services in the power sector. As this trend is expected to continue, the combination of these services in a large scale will be imperative toward a carbon-free power sector. A very promising way to perform this task without any additional emissions is through stoichiometric combustion of the electrolysis products (H2 and O2) in steam and the injection of the generated steam in a conventional steam cycle. However, this can be done only if the product steam has only traces of the two reactants in it, in order to avoid damage of downstream components. The amount of residual gas in the product steam is a direct function of the combustion efficiency. This work analyzes the combustion efficiency of a H2/O2 combustor under steam dilution. As the product gas of such a combustor is primarily steam, the intended efficiency measurement is very challenging and cannot be performed with conventional methods. Instead, an in situ measurement of oxygen and hydrogen is applied. The respective diagnostics and challenges are presented along with the combustion efficiency results. Moreover, a combustor design study is carried out and different flame types (jet and swirl-stabilized flames) are compared. The initial results demonstrate that steam-diluted H2/O2 combustion can achieve an efficiency close to 100%.