Age‐related macular degeneration (AMD) is a devastating eye disease that causes permanent vision loss in the central part of the retina, known as the macula. Patients with such severe visual loss face a reduced quality of life and are at a 1.5 times greater risk of death compared to the general population. Currently, there is no cure for or effective treatment for dry AMD. There are several mechanisms thought to underlie the disease, for example, ageing‐associated chronic oxidative stress, mitochondrial damage, harmful protein aggregation and inflammation. As a way of gaining a better understanding of the molecular mechanisms behind AMD and thus developing new therapies, we have created a peroxisome proliferator‐activated receptor gamma coactivator 1‐alpha and nuclear factor erythroid 2‐related factor 2 (PGC1α/NFE2L2) double‐knockout (dKO) mouse model that mimics many of the clinical features of dry AMD, including elevated levels of oxidative stress markers, damaged mitochondria, accumulating lysosomal lipofuscin and extracellular drusen‐like structures in retinal pigment epithelial cells (RPE). In addition, a human RPE cell‐based model was established to examine the impact of non‐functional intracellular clearance systems on inflammasome activation. In this study, we found that there was a disturbance in the autolysosomal machinery responsible for clearing mitochondria in the RPE cells of one‐year‐old PGC1α/NFE2L2‐deficient mice. The confocal immunohistochemical analysis revealed an increase in autophagosome marker microtubule‐associated proteins 1A/1B light chain 3B (LC3B) as well as multiple mitophagy markers such as PTE‐induced putative kinase 1 (PINK1) and E3 ubiquitin ligase (PARKIN), along with signs of damaged mitochondria. However, no increase in autolysosome formation was detected, nor was there a colocalization of the lysosomal marker LAMP2 or the mitochondrial marker, ATP synthase β. There was an upregulation of late autolysosomal fusion Ras‐related protein (Rab7) in the perinuclear space of RPE cells, together with autofluorescent aggregates. Additionally, we observed an increase in the numbers of Toll‐like receptors 3 and 9, while those of NOD‐like receptor 3 were decreased in PGC1α/NFE2L2 dKO retinal specimens compared to wild‐type animals. There was a trend towards increased complement component C5a and increased involvement of the serine protease enzyme, thrombin, in enhancing the terminal pathway producing C5a, independent of C3. The levels of primary acute phase C‐reactive protein and receptor for advanced glycation end products were also increased in the PGC1α/NFE2L2 dKO retina. Furthermore, selective proteasome inhibition with epoxomicin promoted both nicotinamide adenine dinucleotide phosphate (NADPH) oxidase and mitochondrial‐mediated oxidative stress, leading to the release of mitochondrial DNA to the cytosol, resulting in potassium efflux‐dependent activation of the absent in melanoma 2 (AIM2) inflammasome and the subsequent secretion of interleukin‐1β in ARPE‐19 cells. In conclusion, the data suggest that there is at least a relative decrease in mitophagy, increases in the amounts of C5 and thrombin and decreased C3 levels in this dry AMD‐like model. Moreover, selective proteasome inhibition evoked mitochondrial damage and AIM2 inflammasome activation in ARPE‐19 cells.