Hehe, I knew what was up as soon as I read electrical-smoke+shed+whirlybird.
My prev neighbours had done exactly the same thing - minus the fire, but!... I knew where they lived before(same street- their dad owns both houses) and that place had a shed go the same way as your neighbour... rofl.
Actually, the previous tenants in my house (rental) did the same thing, there's a hook in the garden shed ceiling(to hang the light) and expanda-foam sealant everywhere(to stop tell-tale light getting out) and most damning... mixture ratio's for 'gro' and 'bloom' fertilisers written on the wall in perm marker pen
EDIT: Oh yeah, at a prev workplace there was a yard across the road with a couple of shipping containers, I rock up to work after a day off and my workmates said I shoulda been there yesterday.... for the drug bust across the road. Massive amount of plants apparently.
They must've thought that setting up in a light industrial area would get around any suspicions about high power usage... they didn't factor the shipping containers glowing white hot in the police helicopters infra-red camera!