Stories of Chinese hackers causing blackouts in Florida and the Northeast have had the blogosphere on fire for days. False alarm: The real threat comes from physical terrorist attacks on the world’s largest machine — the U.S. power grid.

The Northeast blackout of 2003 began in Eastlake, Ohio, but didn’t just take out power to that one small town. Due to the structure of our power grid, a problem in that one local station cascaded down, cutting power to 20 million people. The blackout, which covered almost 10,000 square miles, resulted in economic losses estimated at over $6 billion.

Eastlake was chalked up to human error, but a deliberate terrorist attack on the electric grid could be devastating to American security and the economy — making the grid a very attractive target to terrorists.

Sound far-fetched? If we lost power on Wall Street, it would disrupt more than $100 billion a day in Federal Funds trading and billions more in private transactions.

The only thing that prevented that catastrophe five years ago were emergency generators that kept Wall Street running in the days following the blackout — and they almost ran out of time.

Even without a terrorist attack on the grid, $100 billion is lost annually in the United States from power outages. That means that nearly 50 cents for every dollar we spend on electricity goes toward dealing with outages.

The NYC electrical grid already is being strained by the escalating power demands from plasma TVs, and the coming wave of hybrid and electric plug-in cars will only add to demands on the city.

The closer the grid gets to hitting capacity and buckling from consumer demand, the more and more vulnerable it becomes to natural disasters and terrorist attacks causing blackouts, rolling outages and cascading failures.

The Department of Energy has taken the lead on countering this threat and has come up with a plan to be rolled out in 2020. But will terrorists conveniently wait for the next 12 years to exploit this vulnerability?

Fortunately, some groups are stepping in to fill the gap. ConEdison, American Superconductor and the Department of Homeland Security are determined to keep the lights on in New York no matter what terrorists throw at the grid.

In less than two years, the three organizations plan to launch a program they’re calling the Resilient Electric Grid, which provides a new superconductor cable that can link up stations and ensure the steady flow of juice to all parts of the city.

Right now, if an area like the financial district is targeted and goes down, the grid will not allow any other stations to assist by donating electricity to keep the lights on in that area.

But when this superconducting cable is integrated with the existing electrical grid, it will link up substations and allow them to share excess capacity in case of an emergency.

In the event of a deliberate attempt to cause a cascading failure similar to the blackout of 2003, it also will be able to limit the current flow between substations during fault conditions.

The effort was dubbed "Project Hydra" after the mythical beast that grew a new head each time any was chopped off.

Once the capability for multi-path electrical resilience goes live in the New York City electric grid in 2010, the plan is to roll out Hydra to protect other national critical infrastructure.

Project Hydra also has plans to install micro wind and water turbine generators on rooftops to ensure ongoing power generation for neighborhoods in the event of a crisis.

Guarding every power line from a terrorist attack is an impossibility for forces that already lack resources, but Project Hydra will allow our guns, guards and badges to be focused on nuclear plants and other places where they are critical to stopping terrorist attacks.

Allison Barrie consults at the highest levels of defense, has travelled to more than 70 countries, is a lawyer with four postgraduate degrees and now the author of the new book "Future Weapons: Access Granted"  covering invisible tanks through to thought-controlled fighter jets. You can click here for more information on FOX Firepower columnist and host Allison Barrie and you can follow her on Twitter @allison_barrie.