The instructor (CFI) had the student fly the airplane down the runway in ground effect with full flaps. The CFI then raised the flaps to the first notch, at which time, he became distracted. He reported that by the time his attention returned to the airplane, it had veered to the left side of the runway. According to the CFI, they were too slow to fly out of ground effect, so full power was added in an attempt to recover. The right wing then contacted a runway light off the left side of the runway.