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The phrase "a serious setback when" is correct and usable in written English.
It can be used to introduce a situation or event that caused a significant difficulty or obstacle at a specific time or under certain circumstances.
Example: "The project faced a serious setback when the main developer left the team unexpectedly."
Alternatives: "a major obstacle when" or "a significant hindrance when".
Exact(14)
In India the company suffered a serious setback when it resolved, under the inspiration of Sir Josiah Child, to resort to armed trade and to attack the Mughals.
In January, the government suffered a serious setback when councils in Cumbria rejected a proposal to host a deep geological disposal site.
Last year, the polio eradication program suffered a serious setback when cases globally rose to 1,918 because of a large outbreak in Uttar Pradesh in India.
In March, Britain's nuclear program suffered a serious setback when two German companies, RWE and E.On, announced that they would not proceed with a £15 billion joint venture in Gloucester.
Gene therapy suffered a serious setback when authorities in France and the United States announced that the field's first and only successful experiment may have given a 3-year-old boy an illness similar to leukemia.
Last week it faced a serious setback when plans for a share buyback that would have given investors £3.4bn in return for 25percentnt of their holdings were put off.
Similar(44)
But attempts to address the build-up of contaminated water in reactor basements suffered a serious setback last year when storage tanks sprung leaks.
LONDON — Britain's plans for a new generation of nuclear reactors suffered a serious setback Thursday when two German energy companies decided to abandon a multibillion-dollar nuclear power project because of costs.
Future exploration in Alaska faced a serious setback last week when ConocoPhillips announced that it was suspending plans to drill in Alaskan Arctic waters in 2014 because of uncertainties over federal regulatory and permitting standards.
A serious setback occurred when 18-year-old Jesse Gelsinger died in a University of Pennsylvania gene therapy trial for ornithine transcarbamylase (OTC) deficiency in 1999.
The economy suffered serious setbacks when in 2000 and 2001 Mozambique was hit by floods which affected about a quarter of the population and destroyed much of its infrastructure.
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Since I tried Ludwig back in 2017, I have been constantly using it in both editing and translation. Ever since, I suggest it to my translators at ProSciEditing.

Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com