Windows Server Backup Fails: There is not enough disk space to create the volume shadow copy...
Solution 1:
Change your VSS for the system partition to use the C:\ at present it doesn't have enough space to create VSS for itself so fails the backup.
Solution 2:
Assign "System Reserved volume" I:
Run fsutil usn deletejournal /N /D I:
Remove drive Letter I:
Backup again
https://www.partitionwizard.com/partitionmagic/backup-not-enough-space.html