After few trials and errors, I figured out what was causing this error.

If there is existing Excel session and you are editing something there - such as if you are editing the worksheet name but did not complete the edit by hitting ENTER, or if you double click on existing cell to add/edit text but did not complete the edit by hitting ENTER, or if you select a cell and start editing it by clicking in the edit/formula bar but did not complete the edit by hitting ENTER, etc. In other words, Excel is "busy".

In this case QB will throw this error. All you have to do is to complete the edit in existing Excel session by hitting ENTER or hit ESCAPE to discard your changes, and export report again.