Cannot execute powershell file with function call in Transact SQL script
After encountering this same problem, I've found out that I needed to check the ExecutionPolicy on both machines. I knew my ExecutionPolicy was fine on my machine, but I checked the SQL server machine via:
EXEC master..xp_cmdshell 'powershell -command "& { Get-ExecutionPolicy }" 'which returned Restricted (which means that no Powershell script can run, and hence I ran into the same error message that you did).
Additionally, I also made sure my script was stored in a location that SQL Server had permission to access. You could check this in your case with a command like:
EXEC master..xp_cmdshell 'powershell -command "& { dir C:\Users\mslaats\Desktop\Databasescripts\Powershell }" 'And that command will let you know if SQL can see your script or not. In my case, I put my script in a shared network location I knew SQL could already access.