This site seems to have a decent explanation:
Some portable generators are intended for use on jobsites, and therefore are subject to OSHA regulations for GFCI protection on all receptacles. These "contractor grade" generators have their neutral wire bonded to the ground wire to pass OSHA inspection on job sites. Since home and building main load centers also have the neutral bonded to ground, a loop is created, comprised of the neutral wire and the ground wire. A small amount of current is induced in this loop by the running generator. and since the neutral wire passes through the ground fault sensor, the GFCI senses this induced current and trips the main circuit breaker in the generator.
When using these neutral bonded generators to power a house or building through a transfer switch, the neutral bond wire on the generator must be removed, preferably by a dealer or a qualified electrician. NOTE: After this action, the generator will no longer pass OSHA inspection on job sites. Contact your dealer to determine if the neutral bond can be removed, and we recommend that a dealer perform this task. Honda dealers may refer to Honda Service Bulletin #20 for instructions on removing the neutral bond. Once this is done, no modifications to your transfer switch installation are needed.
If the neutral bond cannot be removed, you have two choices. The easiest solution is to lift the ground wire coming from the generator inside the transfer switch, and secure it with a wire nut, by itself. This eliminates the loop. Your other choice is to install a Switched Neutral Kit (SNK) accessory with your transfer switch, available thru our website.
Note that the generator is still grounded, it's just the neutral bond is gone. This means that the generator does not meet code for stand-alone operation anymore.
So your options are:
- Install a switched neutral kit
- Change to a neutral-switching transfer switch
- Remove the ground-neutral bond from your genset
Here's the instructions on how to do this for Honda generators: http://www.gen-tran.com/assets/pdfs/HondaGeneratorServiceBulletin20.pdf
Here's another good site that explains the issue and how to fix for several other generators: http://members.rennlist.org/warren/gt5000c.html
I will join longneck, you need to give to give this one to a pro.
If you do not understand about back-feeding a circuit, already, it is too easy to kill someone. I say this without exaggeration.
The biggest problem with running a generator with a transfer switch is that you have to wire it into your main panel.
For basic protection of life, (as well as the law,) it must NOT be possible to have your generator and the power to your house on the same wire, at the same time.
This is not a case of, just for a few seconds, or I would not do that, or I will triple check a written list.
It must not be possible under mechanically, electrically, on with quantum physics.
The reason is that if you put power on the 'dead' wires to your house, it is possible to kill someone a mile away, or more.
Emergency workers expect down lines to be dead. Yes, they do check first, but that does not mean that the situation can not change while they are working on them.
Transformers work backwards, low voltage at your generator (240) quickly becomes high voltage (thousands).
And sometimes people, and pets, or cars, just do not even see a fallen power line.
This is a case of some money to a pro vs life.
Best Answer
For a GFCI to function properly there cannot be a parallel path on the neutral conductor. By using a GFCI compliant transfer switch, it disconnects the neutral conductor too thus preventing a parallel path. It's a great design to incorporate this extra layer of protection for small portable generators.
Now if you're using a permanently installed generator that is hard-wired you have the option to chose whether to switch the neutral or not. This is technically referred to as separately derived vs non-separately derived and all depends on the particular design setup.
There are advantages to each. One being non-separately derived systems do not require extra ground rods which has a tendency to let lightning back up into the structure damaging electronics. More ground rods do not equal better protection. It can actually cause the opposite to happen.
But again, small portable generators that are not designed to be hard-wired are unique in that they can be separately derived and still not require a extra ground rod as they are portable and not permanently installed.