During and after an upgrade from ESXi/vSAN 7.0 U3 to 8.0 U3 on a vSAN enabled cluster with Compression only enabled on the datastore, the free space is greatly reduced resulting in virtual machines being unable to power on.
The vSAN Skyline health check shows alarms for Capacity disks being over 90% full.
ESXi/vSAN 7.x and 8.x
After upgrade the vSAN Compression Only setting is enabled but not being applied, resulting in the large increase of consumed space.
The method of applying compression changed between versions 7.0 and 8.0 and post upgrade the setting was no longer being applied as expected.
The vSAN storage Capacity overview shows that after upgrades were complete space efficiency savings from compression dropped from 1.25x savings to 1.01x and free space dropped from ~20 TB to 4.9 and was continuing to decrease.
The storage policy applied to the VMs did not have the Compression only setting selected.
Once the storage policy with Compression only selected is applied the free space increases and virtual machines are able to power on.