Both the red hanging lights and the red paper lanterns (and probably quite a few more, I didn't check them all) will not place in the world. I believe various lights in the mod are not placing on the side of blocks for unknown reasons.

@armuell All the lights/lanterns need to be crafted into "hanging lights" in order to be placed.

ouroborus is correct, after making colored lights you use them in the hanging lights recipe which provides a placeable item. Here are some example usages:

Wow I'm dumb, thank you for the clarification!