We study numerically and analytically the instabilities associated with phase separation in a solid layer on which an external material flux is imposed. The first instability is localized within a boundary layer at the exposed free surface by a process akin to spinodal decomposition. In the limiting static case, when there is no material flux, the coherent spinodal decomposition is recovered. In the present problem, stability analysis of the time-dependent and nonuniform base states as well as numerical simulations of the full governing equations are used to establish the dependence of the wavelength and onset of the instability on parameter settings and its transient nature as the patterns eventually coarsen into a flat moving front. The second instability is related to the Mullins-Sekerka instability in the presence of elasticity and arises at the moving front between the two phases when the flux is reversed. Stability analyses of the full model and the corresponding sharp-interface model are carried out and compared. Our results demonstrate how interface and bulk instabilities can be analyzed within the same framework which allows us to identify and distinguish each of them clearly. The relevance for a detailed understanding of both instabilities and their interconnections in a realistic setting is demonstrated for a system of equations modeling the lithiation and delithiation processes within the context of lithium ion batteries.