I mean, power fantasies are just endemic to storytelling as a whole. There isn't really a hard "this is when they're good, this is when they're bad," they are core to several genres of media and can't be extracted from them. Most video games are power fantasies, just by nature of their mechanics.
Power fantasy isn't a genre (usually), it is just a tool, same as any other trope or convention. It is a means to engage the audience with a story.
An RPG where you level up and become stronger to defeat more difficult enemies? That's a power fantasy. Undertale where you get the best ending by finding some way to spare absolutely every monster and end every fight mercifully? Power fantasy. The Tomb Raider reboot games that take an almost sadistic glee in putting Lara Croft through absolute hell both physically and emotionally? Those are power fantasies about overcoming and surviving those impossible challenges.
They're not just power fantasies, they have lots of other stuff going on, but power fantasy is an inherent part of them. Romance stories also often include power fantasies, specifically about the power of love. "He's broody, dark and broken, but my love can fix him" is a power fantasy, for example, as is "an unjust society keeps us apart, but we will defy everything to be together!"
Even being The Final Girl who beats the horror monster and walks away at the end of the movie can be a power fantasy, if a rather grim one.
If there is a general case where power fantasies become "bad," I think it is when the power fantasy is all there is, and it subsumes all other parts of the story. Shonen manga often runs into this as they get longer, and the power system and escalating battles against ever more powerful foes become the overriding driving force of the story, to the exclusion of everything else. Shaman King comes to mind for me as a particularly egregious example, or Bleach.
Isekai is also riven with this. You can't walk two steps these days without tripping on a "TRANSPORTED TO ANOTHER WORLD WITH MY SUPER OP CHEAT SKILL" premise, where the entire purpose of the story is simply to act out unchallenged wish fulfilment with no friction or tension or character development. Those stories get boring very very fast... unless of course the power fantasy being played out is your specific power fantasy. Yes, OP protagonists winning everything with no challenge is boring, but this OP protagonist is building a sapphic cottagecore witch polycule with an ever-expanding harem of emotionally damaged lesbians, so... y'know. Maybe I'll give it a pass.
It's generally less interesting and useful to observe THAT something is a power fantasy, than it is to observe WHAT KIND of power is being fantasized about. Zombie apocalypse stories are often power fantasies, for example, but there's a pretty noticeable difference between stories where the power fantasy is banding together and building a life with a found family in horrible circumstances, stealing joy from the end of the world in spite of everything... and stories where the zombie apocalypse is an excuse to enact paranoid right-wing prepper fantasies where the hero protects their property (home, land and women) against the verminous hordes of the monstrous Other, and is reified and uplifted by the employment of brutal violence.