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can you please make sure the version of the Power BI connector that you downloaded from gallery reflects your Designer's version?
I tried the process now on my machine and it worked just fine. There was a little lag after I double clicked on the .yxi installer and before the installation messaged appeared in Designer, but then worked smoothly.
Can you please double check if by any chance the connector was actually installed, by searching "PowerBI" in your Designer's search box?
Alternatively, can you please post a few screenshots of what happens, along with your Designer version (admin or non-admin)?
I recently downloaded the Output to PowerBI connector and installed without issue. I'm wondering if maybe you should try installing for "My account" instead of all users. It also maybe an Alteryx version issue, where the Alteryx version might not be matching with version needed for the Connector.