When changing out the 3-wire 220v outlet in my new garage for a straight blade vs angled-blade 220V design, I noticed that the PO had wired the two hots correctly, but attached the neutral to the ground blade and left the ground wire floating in the box. The wires were connected to the subpanel as you would for a 4-wire 220V setup.
I know the recommended way is to use the ground wire instead of the neutral, but it got me thinking...does it really matter? Neutral goes to neutral bar, which goes to main breaker, and then bonds with the ground. Same difference, more or less?
Seems to me the danger lies with converting 3-wire to 4-wire outlets (ex: some dryers), and using one wire for both neutral and ground. This would give you a hot ground wire, potentially compromising the rest of your circuits?
However - in the case of my air compressor, welder, and space heater, all of them have 3-prong plugs. I should not be seeing any current through the grounding prong, so neutral as a ground should be OK. Am I on the right track here?
P.S: I plan to fix it anyway. I'm more curious than lazy.
In the case of your air compressor and welder, they require a 240V only circuit. All components within the air compressor and welder are 240V items so the circuit that feeds them is only going to be 240V. In a 240V only circuit, there is no separate neutral. Only two 120V legs, one from each side of the panel and a ground. This makes the 120V legs on different cycles 180 degrees apart. The third wire is the ground. Because the two 120V legs are 180 degrees apart, when the one leg is at 120V, the other is at 0 volts and visa-versa. It is how alternating current works. It actually turns off and on. So, when on leg is at 120V, the other leg acts as the neutral and visa versa.
On some appliances such as dryers and ranges, the voltage required is shown on the tag as 120v/240v. This means there are components in the appliance that require only 120v and some that are 220 volt. These appliances should have a 4 prong, 4 wire circuit. By code, they must have a 4 wire circuit. One each for the 110V legs, one for a neutral (the neutral is required for the 110v components), and the last for the ground. These appliances will work with just three wires, although you will not have a dedicated ground. Essentially, the neutral and ground are being handled by one wire when they are connected with just three wires. It will work, but not code.
So, devices that require 220V only, three wires (usually a Black/white and bare ground. The white wire should be wrapped with red tape when used in a 240V circuit).
Devices that require 120/240V, four wires (usually a Black, Red, White and bare ground).
And yes, if you are wiring to a main panel, both the neutral bar and ground bars are bonded together. If you are wiring to a sub-panel, the neutral bar and ground bar should be separated (un-bonded).
The neutral can be thought of as the utility company ground and the isolated ground is a local ground. Yes, they are both connected together to assure there is no chance of a lack of ground. Most utilities now require two ground stakes per service panel to assure there is no chance of a lack of sufficient ground.
The issue you have is, the unused ground wire shouldn't just be floating in the box. it must be either cut off or taped and folded back in the box so there is not chance that it can get in contact with the 120V terminals. Using the white wire as the ground in you 3 prong plug isn't a problem although it should have green tape wrapped on it, both at the receptacle end and the panel end and it should be connected to the ground bar.
Actually, in a three wire 240V outlet, if 12-3 w/ground, 10-3 w/ground or 8-3 w/ground wire is used, only three of the wires should be used. The black and red will be the 120V legs and either the white wire of bare ground wire can be used for the ground. The wire that isn't used must be insulated so that it doesn't contact any other terminal.