As far as I can see, this is just a temporary feature, until the 6th August 2009. There are photos of it here which shows it to be a vertical axis mill, perhaps driving an electrical generator, and the grinding facility seems to be provided by a small domestic kitchen top grinder.
Part of Barbican Art Gallery's current exhibition Radical Nature - Art and Architecture for a Changing Planet 1969-2009, the experimental architectural collective EXYZT has created The Dalston Mill, turning a disused railway line and waste ground in Dalston into a vibrant rural retreat for the people of the area and beyond.
The fully-functioning, 16 metre mill is accompanied by a 20 metre long wheat field, a restaging of environmental artist Agnes Denes' original 1982 pioneering piece.
More coverage from Dan Lepard, in The Guardian.
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