Valve never made Half-Life 2: Episode 3 because it was "never really that happy" with it

Valve has revealed why it never released a sequel to Half-Life 2: Episode 2. 

Speaking to IGN, Veteran Valve level designer Dario Casali discussed the problems associated with a would-be Half-Life 3. In particular, Casali highlighted development on the Source 2 engine and the studio's high internal standards as key obstacles to a Half-Life 2 sequel. 

Valve developed Half-Life 2 alongside the original Source Engine, which proved immensely difficult according to Casali. So when it started work on Source 2, it knew it didn't want to make a new Half-Life until the engine was finished, which was around 2014. However, the exact build used for Half-Life: Alyx was only completed around 2016, when development on the game started. 

Alyx was purpose-made for VR, and beyond creative influences, the presence of a new platform like VR also helped spur Valve to make a new Half-Life in the first place. In a separate interview, Valve boss Gabe Newell explained that "Half-Life games are supposed to solve interesting problems," and that Valve never planned to "crank Half-Life titles out because it helps us make the quarterly numbers." 

This is partly why, as Casali puts, "we were never really that happy with what we came up with." With no problem to solve, no technical or ideological leap to make, a new Half-Life never coalesced, although Valve did take several stabs at one (which never made it to the public). This was also a function of the studio's wariness with regards to scope creep, which Casali says became an especially big concern during the development of Half-Life 2: Episode 2. However, the opportunities and challenges presented by VR gave Valve the impetus it needed to make Alyx. 

Better still, Valve says it's now interested in making a whole host of Half-Life games, whatever they may be.