1PointFive: can direct air capture scale?

The client and the question

An Asian consulting firm researching carbon removal markets asked Northern Lights to assess direct air capture and the strategy of 1PointFive, the Occidental subsidiary building large-scale plants in the United States.

Will direct air capture be used mainly for carbon removal credits or for lower-carbon oil, and how far and how fast can the market scale?

Context

Direct air capture removes carbon dioxide directly from the atmosphere. 1PointFive is building some of the first large-scale facilities, starting in Texas, supported by US policy incentives and long-term offtake agreements with corporate buyers.

The technology can serve two very different purposes: durable carbon removal sold to companies with net-zero commitments, or carbon dioxide used to enhance oil recovery and produce oil with a lower net footprint. The balance between them shapes both economics and credibility.

The cost curve of direct air capture will be written by the first large plants.

Key questions

1. Purpose. How will captured carbon be used: permanent storage for removal credits or enhanced oil recovery?
2. Economics. What cost reductions are needed for direct air capture to scale without subsidies?
3. Market. Who will buy carbon removal at scale, and at what price?

Our approach

We drew on carbon capture experience at energy majors to assess technology, economics and market demand.

1. Cost analysis. Assessment of capital and operating costs and the drivers of cost reduction.
2. Demand review. Analysis of corporate and government demand for durable carbon removal.
3. Scenarios. Market growth scenarios under different policy, cost and demand assumptions.

Key insights

1. Policy support is the launch pad.
   Tax credits and public funding make the first plants viable. The pace of scale-up will depend on policy stability as much as on technology.
2. Removal credits and oil recovery pull in different directions.
   Selling durable removal credits requires permanent storage and strong verification, while enhanced oil recovery offers revenue but weaker climate credibility. Buyers are increasingly distinguishing between the two.
3. Scale requires a step change in cost.
   Direct air capture remains expensive. Learning from the first large plants, cheaper energy and modular designs are needed to bring costs down to levels that support a large voluntary and compliance market.

Outcome

1. A clear market view.
   The client received an assessment of market size, growth drivers and key uncertainties.
2. A strategy assessment.
   We analysed how the developer balances removal credits and oil recovery, and the implications for credibility.
3. Research for client advisory.
   The findings supported the client’s advisory work for Asian corporates evaluating carbon removal purchases.

For discussion

1. Should captured carbon be used to produce more oil?
2. Who should pay for carbon removal at scale: companies, governments or consumers?
3. What would it take for direct air capture costs to fall as fast as solar did?