Is it true that if the transfer switch for a generator switches the grounded conductor, it must be grounded as a separately derived system?

The statement is true. If a transfer switch for a generator switches the grounded conductor, the generator is considered a separately derived system. This situation requires specific grounding measures to ensure safety and reduce the risk of electric shock or equipment damage. In a separately derived system, it's essential to establish a proper ground connection at the location of the generator to ensure that the grounding and bonding requirements of the National Electrical Code (NEC) are met.

This grounding is crucial because it helps create a path for fault currents to safely return to the ground, reducing the possibility of elevated ground potential that could pose a danger to personnel and equipment. Proper grounding also enhances the generator's operation and ensures that protective devices work correctly in the event of a fault.

In this context, discussing other options clarifies why they do not hold. Simply stating that it should be grounded under certain conditions or only in specific settings like commercial applications lacks adherence to the NEC requirements applicable to all situations where generators are involved. Proper grounding is critical in every case where a transfer switch operates in this manner, regardless of load size or the nature of the setting.