Because that's when the inverter is energized. In On grid mode the current is just passed through.
We are talking more than one supply (two per the exception) to a panelboard, correct? So you have no problem in this regard when in off-grid mode, as 705 kicks in. Your objection is in on-grid mode when current just passes through. Your saying the protected loads panel is being supplied from grid by more than one supply ocpd. Okay, I see your objection

hmy:
Part of the Sunny Island listing as a UL category QIKH "Static Inverters, Converters and Accessories for Use in Independent Power Systems" is that it has been evaluated as a
utility-interactive inverter. As such, I feel it's association with the panels to either side is as a utility-interactive inverter. What operation mode the SI is in doesn't matter... 705 applies.
http://database.ul.com/cgi-bin/XYV/...n=versionless&parent_id=1073991993&sequence=1
http://database.ul.com/cgi-bin/XYV/...n=versionless&parent_id=1073991993&sequence=1
With regard to the neutral, how do we keep the right amount of current flowing on the respective neutrals? While maybe a long shot, if the difference in length is long enough then the division of current will be unbalanced enough to overheat one of the neutral conductors. Again, when in on grid mode.
We're getting back to parallel conductors on this matter, but not in the sense the NEC uses under 310.10(H). Since this is a split-phase 3-wire system, the parallel neutral currents establish conductors of the circuit (i.e. parallel currents but not NEC parallel conductors), so 300.3(B) does apply, but not 300.3(B)(1). However, consider that 310.10(H) parallel conductors establishes rules to keep the circuit currents balanced when separated. That is impossible in this installation when SI conductor pairs are separated, so the conductors of all SI's will have to be run in the same raceway etc.
As to overheating a single neutral, that is likely to never occur. Say we have an extreme unbalanced condition... two SI's of the same leg at max input/output (112A, theoretically?). That will be on two ungrounded conductors... but will return on four neutrals. The current on the neutrals won't even get close to their ampacity... probably not even half ...and that's the worst case under nominal conditions. I don't believe any realistic amount of distance will change that enough to have current in excess of any one neutral's ampacity.
With regard to 1/0 copper, the Code allows reduction to #2 when done under engineering supervision. If UL confirms use of product in this manner, I could consider that engineering supervision.
As I have been saying, the setup does not establish parallel conductors under the stipulations of 310.10(H), so the minimum 1/0 or the exception for #2 is not applicable.
For some reason, my enter key is not working and I cannot form paragraphs.
It's a problem with Internet Explorer 10 (perhaps limited to IE10 on Windows 8... don't know for certain) and forum software (not just this forum, but any that uses the same base coding). Only happens in WYSIWYG Mode of the reply editor. You can copy and paste a "return" or switch the reply editor to Source Mode (upper left icon).