I'm experiencing "not enough space" error when trying to create system image to a USB hard drive:

Detailed error: ERROR - A Volume Shadow Copy Service operation error has occurred: (0x8004231f) Insufficient storage available to create either the shadow copy storage file or other shadow copy data.

Blah, blah...

There is not enough disk space to create the volume shadow copy on the storage location. Make sure that, for all volumes to be backup up, the minimum required disk space for shadow copy creation is available. This applies to both the backup storage destination and volumes included in the backup. Minimum requirement: For volumes less than 500 megabytes, the minimum is 50 megabytes of free space. For volumes more than 500 megabytes, the minimum is 320 megabytes of free space. Recommended: At least 1 gigabyte of free disk space on each volume if volume size is more than 1 gigabyte. ERROR - A Volume Shadow Copy Service operation error has occurred: (0x8004231f) Insufficient storage available to create either the shadow copy storage file or other shadow copy data.

I'd tried both - PowerShell

wbAdmin start backup -backupTarget:E: -include:C: -allCritical -quiet

and via Control Panel -> File History button

Clearly both EFI and Windows Recovery Environment partitions don't meet requirements coming from System Image tool (pic below)

On top of that all system partitions are now shown as 100% free in Disk Management, it's disturbing but far from the actual state.

My question is - hot to create System Image in Windows 8.1?