You're right to be asking these questions and scrutinizing the installation plan. Your industrial experience gives you a good foundation, but residential solar installation does have its nuances and code requirements. Let's break down the issues

Understanding the Situation
You want a Load-Side Tap (LST)

You'd prefer to add a breaker in your panel and feed the solar system from there (load side). This is clean, simple, and familiar.

Solar Company wants a Line-Side Tap (LST)

They're proposing to tap into the service entrance conductors before your main breaker. This involves splicing into those heavy-gauge wires.

Transfer Switch

This complicates things because it adds another potential conflict point for power flow (solar, grid, generator).

Addressing Your Concerns and the Solar Company's Reasoning1. The 120% Rule and Load-Side Taps (LST) The Rule

NEC 705.12(B)(2)(b) dictates that the sum of the main breaker rating plus the solar backfeed breaker rating cannot exceed 120% of the service busbar rating.

Your Situation

You have a 225A busbar and a 200A main breaker. 120% of 225A = 270A 270A - 200A (main breaker) = 70A.

This means you could, theoretically, add a breaker rated up to 70A for your solar backfeed if a load side tap was desired! Why the Solar Company says it violates the rule

The size of the solar system is likely larger than can be accommodated by the 70A breaker rating. The Solar company is likely proposing a system with an inverter output larger than can be accommodated on the load side.

Important Considerations



Demand Load Calculation

An alternative is to perform a demand load calculation on the residence to determine if the 70A is not enough.

Panel Capacity

While the calculation above technically works, you also need to make sure your panel has the physical space for another breaker. If your panel is already full, this option won't work.

AHJ Authority

The "Authority Having Jurisdiction" (usually the local electrical inspector) has the final say. They might be stricter or more lenient based on local conditions.2.

Line-Side Taps (LST) aka "Supply-Side Connection" and Splicing Why They're Doing It

Line-side taps allow the solar inverter to feed power before the main breaker, circumventing the 120% rule. This means they can install a larger solar system without upgrading your service panel.

Why You're Uncomfortable



Splicing

Splicing high-current service entrance conductors is inherently riskier than using a breaker. A bad splice can lead to heat buildup and potentially fire.

Line-Side Hazards

Working on the line side is always more dangerous, as the power company must disconnect service to de-energize the conductors.

Aesthetics

Let's be honest, splicing bugs are not the most elegant solution.

Code Compliance

While code compliant, splicing and tapping line-side conductors is NOT in accordance with manufacturer guidance on service disconnects.

Your SquareD Lug Kit Idea

Unfortunately, you're correct. SquareD (and most panel manufacturers) do not allow adding lugs to the line side of the main breaker in residential panels. It's a liability and safety issue for them.3.

The Transfer Switch and Generator Considerations Potential Complications

The transfer switch adds a layer of complexity. The solar system needs to be designed to not backfeed onto the utility grid when the generator is running. The transfer switch and solar system's anti-islanding protection must work in harmony.

Communication is Key

Ensure the solar company thoroughly understands your generator and transfer switch setup. They need to demonstrate how the system will behave under various scenarios (grid power, generator power, both, neither).

What You Should Do1. Demand Load Calculation

Request that the solar company perform a demand load calculation on the residence to see if a smaller breaker could be used on the load side of the panel.2.

Get a Detailed Proposal

Ask for a comprehensive proposal outlining: System Size (kW) Inverter Model and Output Current Wiring Diagram Showing the Exact Connection Point Explanation of how the transfer switch and solar system will interact Explanation of how the system meets NEC code requirements, citing specific sections3.

Research Reputable Installers

Get quotes from multiple installers. Experience matters, especially when dealing with complex setups. Ask for references.4.

Talk to SquareD

If you're truly opposed to the line-side tap, contact SquareD directly. Explain your situation and ask if they have any officially supported solutions for adding solar to your panel. They might have suggestions or alternative components that aren't widely known.5.

Consult with a Third-Party Electrical Engineer or Licensed Master Electrician

For a small fee, you can get an independent assessment of the proposed installation. They can review the plans and ensure they meet code and are safe and reliable.6.

Discuss the Splicing Method

If a line-side tap is unavoidable, press the installer on the specific splicing method they'll use. Ensure they use UL-listed connectors rated for the conductor size and environment. Ask about their experience with this type of connection. Ask for pictures of past installations using similar splicing methods.7.

Be Involved in the Permitting Process

Review the permit application carefully. Ensure it accurately reflects the proposed installation.

Alternatives to Consider Service Panel Upgrade

If the 120% rule is the only barrier, consider upgrading your service panel to a higher amperage (e.g., 300A or 400A). This is expensive but provides more flexibility for future electrical needs and avoids the complexities of a line-side tap.*

AC Coupling

If you are already using a generator, AC coupling may be a viable option for the integration of solar. In an AC coupled system, the solar is fed to the existing generator transfer switch.

In Conclusion

Your instincts are right to be cautious. The solar company's proposal might be code-compliant, but it's essential to understand the reasoning, the risks, and the alternatives. Push for clear explanations, get independent verification, and make sure you're comfortable with the final plan before proceeding. Flag for review