In part 1 we showed that it is possible that if a kidnapped Force Sensitive child is put in a hibernation chamber even a very powerful Force user will not be able to sense the difference between the child being kidnapped and the child being killed. This could be used to explain how Rey was taken from Luke and why he would think that she was dead rather than abducted.
I can hear you questioning now “Okay, but Rey wasn’t in a hibernation chamber the whole time she was growing up on Jakku. Why wouldn’t Luke have been able to sense her there?” The novel Aftermath: Empire’s End coupled with an interesting order of events in The Force Awakens could provide an answer.
During the climax of Empire’s End, Gallius Rax corrupts the “Essence” of Jakku by dropping Yupe Tashu and a Sith mask adorned with red Kyber Crystals down a deep well into the planet’s core. Other stories in Star Wars have shown how places powerful in the Dark Side can mask Jedi from sensing certain things. In Legends, Yoda went to Dagobah because the Dark Side cave there hid him from the Emperor. In Canon, a Sith Shrine beneath the Jedi Temple prevented the Jedi from sensing Palpatine was more than a mere politician.
The Force Awakens implies that Jakku might have done something similar for Rey. The scene where Snoke tells Kylo “there has been an Awakening” happens after Rey has left Jakku, but before she has discovered the lightsaber in Maz’s basement and had her Forceback. However, in one of the Forces of Destiny shorts we see that Rey has been using the Force prior to leaving Jakku. So the “Awakening” Snoke and Kylo sense wasn’t Rey using the Force for the first time. If Jakku was masking Rey from being sensed by other Force users then Kylo and Snoke sensing Rey’s “Awakening” after she left Jakku, but before her Forceback, makes perfect sense.
During the Last Jedi
So there is an explanation for how Rey could have been taken from Luke in a way that would make him think that she was dead and there’s an explanation for why he wouldn’t have been able to sense her while she was on Jakku, but, surely, if she was his daughter he would have realized that during all the time they spent together on Ahch-To, right?
Ah, but Luke was conveniently cut off from the Force for the majority of his time with Rey.
Throughout the movie, Luke alternates between being drawn to Rey and pushing her away. We have previously theorized (https://swshadowcouncil.com/2018/09/13/the-case-for-rey-skywalker-another-interpretation/) that the reason for this is that Luke spends the majority of the film in an existential crisis. He’s drawn to Rey because in his heart he knows who she is, but he pushes her away because his mind is 100% certain that Rey can’t be his daughter because his daughter is dead, he felt her die. As Mark Hamill has said, Luke’s bitterness in the film is at least in part an act. He’s only bitter toward Rey, not so much toward Chewie, or Artoo. The bitter act is an emotional defense mechanism. He can’t bring himself to dare to hope that his daughter is alive, but Rey is so similar to how he knows she would be that it pains him deeply to even be around her so he puts on the bitter act, puts up emotional walls, and pushes her away. Absent his connection to the Force, Luke is unable to sense who Rey is and resolve his internal conflict.
The only scene where Rey and Luke are together where Luke is actually connected to the Force is immediately after Luke discovers Rey with Kylo. In the Empire Strikes Back Yoda implies that sensing things through the Force requires one to be “calm and at peace.” Luke is most emphatically not calm and at peace during this scene.
I will also point out that even with the Force, the Skywalkers don’t exactly have the best track record for sensing long lost relatives that are right in front of them. Luke didn’t sense his connection to either Leia or Vader. Vader didn’t appear to sense any connect to Leia in A New Hope and didn’t sense his connection to Luke in the comics (Boba Fett had to tell him who Luke was). Leia kissed her twin brother. Luke not sensing who Rey was for that brief scene is par for the course for this drama prone family.
There is, however, one final scene in the Last Jedi that implies that Luke did finally realize who Rey was before the end. During Luke’s duel with Kylo on Crait, he tells Kylo “I will not be the last Jedi,” at which point the scene cuts to Rey. Her eyes shoot open and she glances behind her, clearly sensing something. The novelization says Luke reached out to her through the Force to tell her he will “always be there”. The script notes go a bit further to describe Luke and Rey as having a similar connection to the one that Rey and Kylo had been having throughout the film where they are actually seeing each other. When Rey runs to embrace Finn immediately afterwards, the shot zooms in on her face, then cuts back to Luke who is smiling slightly and has a distant look in his eyes as though he is watching her.
This is the scene where Luke first truly connects to Rey through the Force and most likely is the moment where he finally realizes beyond all shadow of doubt who she is. The connection between them persists until Luke’s death when both Rey and Leia sense that Luke is gone. But, of course, no one’s ever really gone.