Representatives from the federal environment department revealed the extent of the setback at a parliamentary inquiry hearing on Wednesday, but could not say when work on the scheme would resume.
The $24.7 million recycling pilot, announced in January, had been expected to establish up to 100 solar panel collection sites across the nation amid record-breaking adoption of the renewable energy technology.
More than 4.5 million rooftop solar systems have been installed across Australia, according to the Clean Energy Regulator, including more than 247,000 systems in the first nine months of 2026.
But as few as 17 per cent of solar panels are recycled at the end of their life, even though the panels hold valuable materials including copper, silver and aluminium.
About three million solar panels weighing 60,000 tonnes reached the end of their life in 2025, according to government estimates, and could grow to 50 million panels or one million tonnes by 2035.
The national solar panel recycling program designed to investigate the issue was suspended on May 15, environment department circular economy division head Donna Looney told committee members, following a complaint about Commonwealth Procurement Rules.
The claim needed to be investigated and resolved before the pilot could continue, she said, and businesses tendering for the work had been informed about the delay.
"We're at a point where the department is working with the complainant to finalise the complaint," Ms Looney said.
The department could not say when work on the recycling pilot would resume, she said, although she hoped it would be before the end of 2026.
In the meantime, the federal government had been working with environment ministers from the states and territories to develop solar panel recycling laws, environment department packaging, stewardship and investment branch head Cameron Hutchison said.
The NSW government planned to finalise the details of a mandatory solar panel stewardship scheme by the end of 2026, he said, which could be followed by other states.
"We're working co-operatively together to make sure that what NSW does bring forward is something that can be picked up or adopted by other jurisdictions or, indeed, could transition into something that the Commonwealth might choose to lead on in the future," he said.
The inquiry is investigating the current disposal practices and potential benefits of recycling solar panels, and has hosted experts in solar panel development, research, reuse and recycling since April.
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