ECN Forum Forums Code Related Discussion NEC & other Code issues adding a sub-panel to existing 10/2 with ground

Pardon if I misunderstand, but the problem is not that this UF lacks a ground, but that it lacks a neutral. I don't see any issue with feeding an isolation transformer from the existing cable, and using the isolation transformer to feed a new 30A panel.

The tricky question is not whether to drive a new ground rod, but whether it's safer to bond the neutral or leave it floating, which would reduce shock hazard. In this case, I don't think code gives us an option; the neutral must be bonded. As it's a separately derived system, there is no issue with bonding the new neutral and existing #10/2 UF ground wire to the new ground rod.

Edit: oops, missed the statement that the inspector wants the ground wire to be insulated the entire way back to the source if used by water. Unbroken is a good point, that's a safety issue... but why insulated? What code requires the ground wire to be insulated, and why would UF (in which, the ground IS insulated) not be considered insulated? Driving a new ground rod and installing an isolation transformer seems to make both these objections rather moot.