The former possibility in your second paragraph vaguely occurred to me, but since Bolin was one of the intended victims, I very much doubt it's true. The latter suggestion is plausible, though.
The suggestion in the first paragraph is a reach, and I'd need some evidence for it before I took it seriously. Though Hound of UIster
makes an interesting suggestion about it.
The thing is though they also heavily show steam being used as a power source, not to mention the gasoline powered satomobiles and the energy packs being carried around by the Equalists.
Sure, but why not use every power source available to them? We use coal and oil and natural gas and hydroelectric and wind power and whatever else is available. Benders can be a power source themselves, so why not use them alongside other sources? Especially if it's a way to employ them and make them contributing members of the Republic's economy.