A circular future for renewable energy projects

The circular economy has become one of the central pillars of Environmental, Social, and Governance (ESG) strategies.¹ As scrutiny over corporate sustainability claims intensifies, circularity is emerging as a key metric for both investors and regulators in assessing long-term viability. Integrating circular economy principles such as extending asset life, optimising resource efficiency, and designing for repairability and end-of-life recovery, now carries more significant legal, financial and reputational implications.

For the renewable energy transition, circularity is both an opportunity and a challenge. While renewable energy is fundamental to decarbonisation, its reliance on finite raw materials raises concerns about resource depletion and waste accumulation. The lack of structured end-of-life regulations and clear decommissioning requirements risks has created unintended sustainability gaps. Regulatory frameworks such as the sustainable finance taxonomies (e.g. the Australian or EU ones) are addressing these concerns by embedding Do No Significant Harm (DNSH) criteria into sustainable activity and project classifications, making circularity a mandatory consideration for investments which must align with the taxonomy.² Beyond facilitating access to sustainable finance, adopting circular economy principles within business models has been shown to enhance profitability and create new market opportunities, driving both financial and operational resilience.³

Voluntary reporting standards including the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB) and the Carbon Disclosure Project (CDP) are also incorporating circular economy metrics, which influence corporate sustainability disclosure practices. However, for circularity to be meaningfully integrated into the renewables sector, the focus should extend beyond recycling to design innovation, product-as-a-service models and secondary markets for repurposed infrastructure.⁴ Addressing these structural gaps will be crucial in ensuring that renewable energy remains a net-positive contributor to sustainability, both environmentally and economically.

Circularity in renewables: the hidden sustainability challenge

Despite their sustainability benefits, solar, wind and battery storage technologies, just like any other products, have significant lifecycle challenges, from raw material extraction to decommissioning. Without structured circularity measures, renewables risk creating a new wave of environmental liabilities, including resource depletion.⁵ Common pitfalls of renewable energy assets include:

• Recycled vs. Recyclability – Many renewable technologies claim circularity, but there is often an overlooked distinction between recycled components and materials, and actual recyclability. Some materials used in renewable energy infrastructure may contain recycled inputs yet lack viable pathways for end-of-life recovery. For example, solar panels may incorporate recycled glass or aluminium, but the high-purity silicon, silver, and rare metals within them remain difficult to extract and reuse efficiently.
• Lack of Life Cycle Assessments (LCAs) – Many renewable energy projects lack comprehensive LCAs. Without assessing the full life cycle, from raw material extraction to disposal, companies risk overstating circularity claims, and underestimating environmental impacts. Particularly if critical end-of-life considerations such as recyclability, repurposing and waste management are not factored in. Standardised LCAs are essential for ensuring transparency, improving material efficiency and preventing greenwashing.

These pitfalls increase the risk of greenwashing allegations as circularity is increasingly used as a sustainability metric. But without clear definitions and accountability, circularity risks becoming a marketing tool rather than a meaningful commitment. Projects that highlight recycled materials while ignoring end-of-life challenges, or which lack robust plans for material recovery and reuse, may give the appearance of sustainability without delivering real impact. If renewable energy infrastructure and projects do not integrate genuine circular economy principles, it risks eroding public and investor trust in the sector’s environmental claims.

Beyond recycling: circularity strategies for renewables

To align with sustainable investor expectations, such as those driven by the EU (and other) Taxonomies for Sustainable Activities, renewables must move beyond basic recycling towards a full circular economy approach. This includes:

• Right to Repair and Longevity – Designing renewable infrastructure for modular repairs and component level replacements, rather than full asset disposal. The Warranty policies would also need to be adjusted to reflect these developments and not incentivise pre-mature disposal.
• Product-as-a-Service Models – Shifting from ownership to leasing models, such as battery leasing programs, to incentivise manufacturers to design longevity and recyclability.
• Secondary Markets – Developing pathways for repurposing solar panels, wind turbine components and battery materials into new energy applications or alternative industries.

Regulatory and market incentives

Regulatory frameworks are increasingly embedding circular economy criteria into sustainable finance taxonomies, reinforcing circularity as a requirement of ESG-aligned investment. This shift is a positive and necessary evolution, ensuring that green finance flows toward projects with verifiable sustainability credentials. By establishing clear thresholds and compliance mechanisms, these frameworks drive innovation, efficiency, and long-term resilience in renewable energy investments.

The EU taxonomy: leading the way in circularity standards

The EU Taxonomy for Sustainable Activities is the most advanced regulatory framework integrating circular economy principles into sustainable finance. It provides objective criteria for defining what qualifies as environmentally sustainable economic activity.⁶ Such as:

• Circular economy as a key environmental objective – The EU Taxonomy recognises circular economy as one of six climate and environmental goals, incentivising businesses and projects that contribute significantly to resource efficiency, waste reduction and material recovery in their operations.⁷
• Mandatory DNSH compliance – Even if a project contributes to climate mitigation, it must still meet circular economy DNSH criteria to qualify for green finance.⁸ This ensures that renewable energy investments also address material other sustainability and lifecycle impacts.

Australia’s emerging taxonomy: a defining moment for circularity in renewables

Australia is in the process of developing its own sustainable finance taxonomy, and this represents a critical opportunity to align with global better practices.⁹ While DNSH criteria for a circular economy already exist, the absence of a defined (sustainable contribution) definition will create uncertainty for investors and project developers as to the extent circularity is weighted. Despite this, there are numerous potential benefits were the Australian taxonomy to include circularity, including:

• A safeguard against ESG-washing – Establishing clear and well-defined circular economy criteria will ensure that only projects genuinely integrating circular economy principles qualify for sustainable finance classification. While the Australian taxonomy remains voluntary, aligning it with global best practices will strengthen investor confidence and market integrity, encouraging greater transparency and accountability.
• Ensuring renewable energy investments meet global benchmarks – To remain competitive in international ESG markets, Australia’s taxonomy must explicitly address decommissioning, recyclability and lifecycle efficiency in renewables. A strong framework will help attract green capital and position Australia as a leader in sustainable energy finance.

Australia’s taxonomy presents a transformative opportunity to future-proof renewable energy investments, ensuring projects not only contribute to decarbonisation but also align with circular economy principles. If implemented effectively, it will strengthen Australia’s position in the global green finance landscape, drive industry-wide innovation and set new standards for lifecycle sustainability in the renewables sector.

Emerging solutions

In addition to the recent regulatory developments, Australia is advancing renewable energy material and component recycling, driven by both innovative research and substantial government support. Some recent examples include:

• Researchers at the University of New South Wales (UNSW) pioneering a solar panel recycling method capable of separating up to 99 per cent of photovoltaic cell materials from end-of-life solar panels.¹⁰ This breakthrough not only enhances material recovery but also sets the stage for more efficient recycling processes. In recognition of this progress, the Australian Research Council has allocated $5 million to establish a dedicated research hub at UNSW, aiming to transform the nation’s photovoltaic recycling industry.¹¹
• The NSW Government launching the Circular Solar grants program, a $10 million initiative designed to manage the anticipated increase in solar panel and battery waste.¹² Projections indicate that NSW will generate between 3,000 to 10,000 tonnes of such waste annually by 2025, escalating to 40,000 to 71,000 tonnes by 2035. This program supports collaborative projects that trial end-of-life solutions for solar panels and battery systems within a circular economy framework.

These continued efforts in industry and innovation will enhance Australia’s onshore recycling capabilities alongside the policy measures taking place.

Next steps

Circularity should no longer be an afterthought, it is a regulatory, financial, and strategic necessity for the renewables sector. Without circularity integration, renewable projects risk sustainability shortfalls, greenwashing blame, higher costs, and declining investor confidence.

To avoid these risks, developers, manufacturers, investors, and policymakers should consider:

1. Renewable energy developers should embed circularity in project design, ensuring materials, supply chains, and decommissioning strategies align with ESG principles and sustainable finance requirements.
2. Manufacturers should shift toward repairable, reusable and repurposable products, supporting longer asset lifespans and secondary market applications, in addition to integrating recycled material content in their products.
3. Investors should require verifiable LCAs and taxonomy-aligned disclosures to ensure circularity is genuinely embedded in renewables projects.
4. Policymakers should introduce clear extended producer responsibility frameworks and lifecycle accountability regulations, ensuring renewable infrastructure does not become the next waste crisis.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.

Materra is a sustainability consultancy that helps organisations navigate the shifting sustainability landscape, from mandatory sustainability reporting and compliance to voluntary ambition and performance no matter what stage they are at in their journey. For more information, please contact Linda Romanovska.

¹International Renewable Energy Agency, ‘Circular economy’ (Web Page, 2024) <https://www.irena.org/Energy-Transition/Policy/Circular-economy>.

²Stuart Bowles, ‘Unpacking the EU Taxonomy’s Do No Significant Harm provision’, S&P Global (Article, 25 July 2023) <https://www.spglobal.com/esg/insights/blog/unpacking-the-eu-taxonomy-s-do-no-significant-harm-provision>.

³Vera Palea, Cristina Santhià and Aline Miazza, ‘Are circular economy strategies economically successful? Evidence from a longitudinal panel’ (2023) 337 Journal of Environmental Management 1.

⁴Robert Brears, ‘Designing for a Circular Economy: How to Create Sustainable Products that Drive Growth and Innovation’, Medium (Article, 23 September 2024) <https://medium.com/mitidaption/designing-for-a-circular-economy-how-to-create-sustainable-products-that-drive-growth-and-84d55439691d>.

⁵European Environment Agency, ‘Emerging waste streams: Opportunities and challenges of the clean-energy transition from a circular economy perspective’ (Briefing Summary, 10 February 2023) <https://www.eea.europa.eu/publications/emerging-waste-streams-opportunities-and>.

⁶European Commission, ‘EU taxonomy for sustainable activities’ (Web Page, 2024) <https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities_en>.

⁷Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 [2020] OJ L 198/13, art 13.

⁸Ibid, art 2a.

⁹Australian Government Treasury, Sustainable Finance Roadmap (Roadmap, June 2024) <https://treasury.gov.au/sites/default/files/2024-06/p2024-536290.pdf>.

¹⁰David Carroll, ‘Australian researchers eye redesigned panel as part of recycling plans’, PV Magazine (Article, 9 July 2024) <https://www.pv-magazine.com/2024/07/09/australian-researchers-eye-redesigned-panel-as-part-of-recycling-plans/>.

¹¹Stefanie Menezes, ‘UNSW awarded $5m for new solar panel recycling research hub’, UNSW Sydney (Media Release, 24 June 2024) <https://www.unsw.edu.au/newsroom/news/2024/06/unsw-awarded-5m-for-new-solar-panel-recycling-research-hub>.

¹²NSW Environmental Protection Agency, ‘Circular solar grants program’ (Web Page, 28 January 2025) <https://www.epa.nsw.gov.au/working-together/grants/infrastructure-fund/circular-solar-trials>.