Hey,
It should be related to a lot of shadow copies created on your drive, you should try deleting old copies on the volume. Reference: https://learn.microsoft.com/en-us/answers/questions/837737/backup-on-windows-server-2016-insufficient-space
As another option, you can try configuring iSCSI target on a different storage and test backups. StarWind VSAN can be used to create a target. https://www.starwindsoftware.com/starwind-virtual-san
Cheers,
Alex Bykovskyi
StarWind Software
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