Services, LocalSystem, and shares are a troublesome mix. Active Directory can sometimes help, but most home users won’t have it, and I wouldn’t be able to help you with that anyway. Here’s an example of trouble:
Service Install Backup to UNC Paths
When running from a service, you do not have the “user context”.
The account is not associated with any logged-on user account.
The service presents the computer’s credentials to remote servers.
Services and Redirected Drives
A service (or any process running in a different security context) that must access a remote resource should use the Universal Naming Convention (UNC) name to access the resource.
So I’m not sure quite what path would steer around all the impediments, but my past attempts at getting shares working have been quite erratic, possibly due to various setups that are cached awhile then end.
If your own account is an “Administrator” as opposed to “Standard User”, you can change the service to run as you. I think there’s a way to tell it to elevate (like UAC can do) which VSS might insist on having…
If a service still won’t get access, you could start Duplicati via a shortcut with Properties → Shortcut → Advanced → Run as administrator checked, and there’s also a trick involving starting a task to do that, basically saving you the trouble of having to manually go through the UAC prompt to get the program up.