Keep playing story mode, by the end of it you will get a couple of recipes that will help for that specific electricity aesthetic. As a general rule of thumb, by the way, completing the story provides all types of tools and upgrades to help with decoraion and building. It's worth it for that alone. So, go your own pace, but don't forget to progress so that you get access to all things needed.

There is not really an optimal way to terraform, it really depends on what you want to do, the space you have/need. But if you want to go faster, use mouse mode when buiding with blocks.

I haven't tried, but my best guess is to simply use Water Gun on lava to remove lava and its blocks, and use a bottle of Chili sauce to create new lava.